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The current 2022 Fed rate hike cycle is the fastest, with a 2.36 percentage point increase in just six months. In contrast, the 1988-1989 cycle took 14 months to reach a 3.23 percentage point increase, making the current cycle nearly twice as fast.
The most severe rate hikes took place during the 2004-2006 cycle, with the EFFR climbing by almost four percentage points. However, this occurred over a more extended period, taking two years to reach that level.
The variation in rate hike cycles is primarily driven by the Fed’s response to changing economic conditions, including inflation, employment, and other factors. In the current 2022 cycle, high inflation rates have prompted the Fed to act more aggressively to contain inflationary pressures. The rapid pace of rate hikes, however, poses risks to the economy, as it can lead to an economic slowdown and potentially contribute to a global recession and in 2023 bank failures.
