Federal Reserve raises interest rates by 75 basis points for third straight month – Fox Business | Jewelry Dukan

That federal reserve on Wednesday raised its benchmark interest rate by 75 basis points for the third straight month as it struggles to bring scorching inflation under control, a move that could slow U.S. economic growth and worsen financial woes for millions of homes and businesses threatens.

The three-quarters-point hikes in June, July and September — the most aggressive series of hikes since 1994 — underscore Fed officials’ seriousness about managing the inflation crisis after a series of alarming economic reports. Policymakers unanimously voted in favor of the latest outsized increase.

The move puts the key overnight benchmark rate in a range of 3% to 3.25%, the highest level since the 2008 financial crisis. This marks the fifth consecutive rate hike this year.

In addition to the big rate hike, Fed officials proposed an aggressive path of rate hikes for the remainder of the year. New economic forecasts released after the two-day meeting show policymakers expect interest rates to hit 4.4% by the end of the year, suggesting a further three-quarters-point increase is on the table.

BILLIONAIRE DAVID RUBENSTEIN WARNS INFLATION WILL BE ‘HARD’ FOR THE FED TO CUT

Officials expect to hike rates further in 2023 before stopping at a 4.6% churn rate — well in the restrictive zone — and finally easing rates slightly from 2024 onwards. That’s a far more restrictive outlook than officials laid out earlier this year. Policymakers see interest rates falling to 3.9% in 2024 and 2.9% in 2025.

The rate hike decision and the latest economic forecasts underscore the Fed’s determination to get inflation under control, even if it means risking an economic recession.

“We have to get inflation behind us,” Chairman Jerome Powell said during a press conference after the Washington meeting. “I wish there was a painless way to do this.

The median projections imply that officials will hike the reference rate by another 125 basis points this year, suggesting a 75 basis point hike in November and 50 basis points in December. However, Powell said no decision has yet been made on the size of the hikes over the next few months, stressing that officials are basing the decision on forthcoming economic data.

Inflation has remained stubbornly high despite numerous aggressive rate hikes. Last month was even hotter-than-expected as the consumer price index, a broad measure of the price of basic necessities that includes petrol, groceries and rent, rose 0.1% mom in August, beating hopes nullified on a slowdown. on an annual basis, inflation is running at 8.3% – a nearly 40-year high.

Federal Reserve Chairman Jerome Powell arrives to speak during a press conference following a Federal Open Market Committee (FOMC) meeting on Wednesday, September 21, 2022, in Washington, DC, USA. (Photographer: Sarah Silbiger/Bloomberg via Getty Images/Getty Images)

Of even more concern is the rise in core prices, which rose 0.6% mom in August – a larger increase than in April, May, June and July and a worrying sign for the underlying value inflationary pressures stay strong in business.

But efforts to fight inflation have potential danger of a recession, with a growing number of economists and Wall Street firms forecasting an economic downturn this year or next. Rising interest rates tend to result in higher interest rates on consumer and business loans, which slows the economy by forcing employers to cut spending. Mortgage rates have nearly doubled to 6% in a year, while some credit card issuers have hiked rates to 20%.

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Economists largely agree that the risks of a recession have increased significantly this year and that it will become increasingly difficult to avoid a downturn in the near term as the Fed tightens monetary policy.

Powell has previously argued that a “soft landing” – the sweet spot between moderating inflation without slowing growth – is possible, but he appeared to back down on that promise on Wednesday. The Fed chair conceded that a recession was possible and that a soft landing was “very challenging”.

“The chances of a soft landing are likely to diminish to the extent that policies need to be more restrictive or longer restrictive,” he said. “Nevertheless, we are committed to bringing inflation back to 2%. We believe that failure to restore price stability would mean far greater pain.”

federal reserve

The Marriner S. Eccles Federal Reserve building in Washington, DC, USA on Wednesday July 6, 2022. (Photographer: Al Drago/Bloomberg via Getty Images/Getty Images)

The updated forecasts showed that the unemployment rate will rise to 4.4% from the current 3.7% by the end of next year. That’s significantly higher than in June, when policymakers saw the unemployment rate rise to 3.7%. Meanwhile, estimates for economic growth were lowered to 1.2% in 2023 and 1.7% in 2024.

“With the new interest rate forecasts, the Fed is planning a hard landing – a soft landing is almost out of the question,” said Seema Shah, chief global strategist at Principal Global Investors. “Powell’s acknowledgment that there will be some period of below-trend growth should be translated as the Fed’s case for ‘recession’. Times are going to get tougher from here.”

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