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The Federal Reserve (Fed) on Wednesday did something it hadn’t done in more than two decades: it raised the federal funds rate by 75 basis points, to 1.50-1.75%, a hike not seen since 1994. 

The decision, designed to slow the pace of inflation, which reached 8.6% in May — the highest mark in more than 40 years — has potential to increase the cost of mortgage borrowing.

“Overall economic activity appears to have picked up after edging down in the first quarter,” the Federal Open Markets Committee said in a statement Wednesday afternoon. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures.”