When was the last round Fed hike 50-basis point and more?

By Wong Kon How


It was 22 years ago in 2000, but counting back another cycle of 22 years, in 1978 was the most interesting. Current numbers mirror it in terms of its GDP, unemployment and inflation. What's even more interesting was how it has developed the next two years


This year GDP should come in at 3%, March unemployment rate at 3.6% and inflation at 8.5%.


Following are those years where we observed the Fed made at least a 50-basis point hike for each meeting, it indicates that "inflation is urgent" and we did not consider any lesser than 50 basis point:


· 1978 – 3 Times

The GDP was 5.5% in 1978, unemployment was 6.0%, and inflation was 7.6%.


· 1979 – 5 Times

The GDP was 3.2% in 1979, unemployment was 6.0%, and inflation was 11.3%.


· 1980 – 6 Times

The GDP was -0.3% in 1980, unemployment was 7.2%, and inflation was 13.5%.


· 1981 – Once

The GDP was 2.5% in 1981, unemployment was 8.5%, and inflation was 10.3%.


· 1984 – Twice

The GDP was 7.2% in 1984, unemployment was 7.3%, and inflation was 4.3%.


· 1987 – Once

The GDP was 3.5% in 1987, unemployment was 5.7%, and inflation was 3.6%.


· 1988 – Once

The GDP was 4.2% in 1988, unemployment was 5.3%, and inflation was 4.1%.


· 1994 – Twice

The GDP was 4.0% in 1994, unemployment was 5.5%, and inflation was 2.6%.


· 2000 – Once

The GDP was 4.1% in 2000, unemployment was 3.9%, and inflation was 3.4%.


Lifestyle in the 70s are much different, therefore the unemployment may not be a reliable comparison. What struck me was the development between the GDP growth and inflation between 1978 and 1980.


In 1978 GDP is still positive and inflation crossed above 7% and there were 3 interest hike that is at least 50 basis point. As the inflation persisted, GDP started declining and that’s where interest rates hike was the most aggressive in 1979 and 1980.


GDP in its positive zone, March unemployment rate at 3.6% and inflation at 8.5%. There are 6 more Fed meeting this year, let’s keep watch between the outcome of each meeting and the GDP and inflation numbers


Disclaimer: The historical timeline on interest rate hike is from the source “the balance”, please verify the accuracy on your end.


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