The Federal Reserve pumped up its benchmark interest rate Wednesday by three-quarters of a point for a fourth straight time to fight high inflation, but also hinted that it could soon reduce the size of its rate hikes.
WASHINGTON — The Federal Reserve pumped up its benchmark interest rate Wednesday by three-quarters of a point for a fourth straight time to fight high inflation but also hinted that it could soon reduce the size of its rate hikes.
The Fed’s meeting occurred as financial markets and many economists have grown nervous that Chair Jerome Powell will end up leading the central bank to raise borrowing costs higher than needed to tame inflation and will cause a painful recession in the process. Powell appeared to be trying to strike a delicate balance in suggesting both that Fed may start downsizing its rate increases yet remains focused on defeating inflation and raising rates as high as necessary.US economy returned to growth last quarter, expanding at a 2.
“Chair Powell stuck to this two-pronged message: We’re not done yet, due to high inflation and a strong commitment to bring it down,” Sal Guatieri, senior economist at BMO Capital Markets Economics, wrote in a note. “But we may not need to keep cranking rates aggressively, due to an economy that has slowed significantly from last year and long-term inflation expectations that are still ‘well anchored.
Several Fed officials have said recently that they have yet to see meaningful progress in their fight against rising costs. Inflation rose 8.2% in September from 12 months earlier, just below the highest rate in 40 years.Still, the policymakers may feel they can soon slow the pace of their rate hikes because some early signs suggest that inflation could start declining in 2023. Consumer spending, squeezed by high prices and costlier loans, is barely growing.
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