The Federal Reserve raised its benchmark interest rate on Wednesday by three-quarters of a point for the fourth time in a row, but hinted that it may soon reduce the size of its rate increases. 3.75% to 4%, a 15-year high. It was the sixth time the central bank’s interest rate rose this year — a series that has made mortgages and other consumer and business loans increasingly expensive and raised recession risks, but in a statement, the Fed suggested it could soon turn deeper. The frequency of the rate increase. In the coming months, she said, she will look at the cumulative effect of her large interest rate hikes on the economy. Noting that raising interest rates takes time to fully affect growth and inflation, these words indicated that Fed policymakers may believe borrowing costs are rising enough to slow the economy and reduce inflation. If so, it may indicate that they do not need to raise prices as quickly as they did, however, for now, the persistence of inflated prices and high borrowing costs are putting pressure on American households and undermining the ability of Democrats to campaign. on the health of the labor market and they are trying to control Congress. Republican candidates have criticized Democrats over the punishing effect of inflation in the run-up to the midterm elections that will end on Tuesday, and the Fed’s statement was released on Wednesday after its latest policy meeting. Many economists expect President Jerome Powell to indicate at a press conference that the Fed’s next rate hike in December could be only half a point, not three quarters. But after he miscalculated last year’s inflation as likely transient, Powell pushed the Federal Reserve to sharply raise interest rates to try to slow borrowing and spending and ease price pressures. to disrupt the economy. The government reported that the economy grew in the last quarter, and employers are still hiring at a solid pace. But the housing market has collapsed, and consumers are barely spending more, with mortgage buyer Freddie Mac reporting that the average 30-year fixed-rate mortgage rate, just 3.14% a year ago, topped 7% last week. Existing home sales have fallen for eight straight months, and Plerina Orochi, an economist at T. Rowe Price, suggested that the drop in home sales is a “coal mine canary” implying that the Fed’s hike in interest rates is dampening the higher interest rate. A sensitive sector such as housing. Orochi noted, however, that the Fed’s hikes have not yet appreciably slowed much of the rest of the economy, particularly the labor market or consumer demand. Relying on low inflation “close to their 2% target over the next two years. Several Fed officials recently said they had yet to see meaningful progress in their battle against rising costs. Inflation rose 8.2% in September from 12 months prior, It is just below its highest rate in 40 years, however, policy makers may feel that they can soon slow the pace of rate hikes because some early indications are that inflation may start to decline in 2023. Spending, which has been squeezed by prices, is barely growing. Higher prices and more expensive loans Supply chain crises recede, which means fewer shortages of goods and spare parts Wage growth is flat, which, if followed by declines, should reduce inflationary pressures, yet the labor market remains consistently strong, Which could make it difficult for the Federal Reserve to cool the economy and curb inflation.This week, the government reported that companies announced more jobs in September than they did in August.There are now 1.9 jobs available for every unemployed worker, which is an unimaginably large supply. Normal The higher percentage that employers will likely continue to raise wages to attract and retain workers. Higher labor costs are often passed on to customers in the form of higher prices, driving up inflation, and eventually, Goldman Sachs economists expect Fed policymakers to raise the key rate to nearly 5% by March. This is higher than the Fed itself had forecast in its previous set of forecasts in September. Outside the US, many other major central banks are also rapidly raising interest rates to try to cool inflation levels that are higher than last week, the European Central Bank announced a second rate hike in a row, raising rates at the fastest pace in history. The euro currency in an attempt to curb inflation that rose to a record high of 10.7% last month, similarly, the Bank of England is expected to raise interest rates Thursday to try to ease consumer prices, which rose at the fastest pace in 40 years, to 10.1% in September. Even as rates are raised to combat inflation, both Europe and the UK appear to be heading into recession.
The Federal Reserve raised its benchmark interest rate on Wednesday by three-quarters of a point for the fourth time in a row, but hinted that it may soon reduce the size of its rate increases.
The Fed’s move raised the key short-term interest rate to a range of 3.75% to 4%, its highest level in 15 years. It was the sixth rate hike by the central bank this year – a succession that has made mortgages and other consumer and business loans increasingly expensive and raised recession risks.
But in a statement, the Fed suggested that it may soon switch to a more deliberate pace of rate hikes. In the coming months, she said, she will look at the cumulative effect of her large interest rate hikes on the economy. He noted that raising interest rates takes time to fully affect growth and inflation.
These words indicated that Fed policymakers may believe that borrowing costs are rising enough to slow the economy and reduce inflation. If so, that indicates that they do not need to raise prices as quickly as they used to.
However, for now, persistent price inflation and rising borrowing costs are putting pressure on American households and undermining Democrats’ ability to campaign for labor market health as they try to take control of Congress. Republican candidates have attacked Democrats over the punishing effect of inflation in the run-up to the midterm elections, which end on Tuesday.
The Fed’s statement was released on Wednesday after its latest policy meeting. Many economists expect President Jerome Powell to indicate at a press conference that the Fed’s next rate hike in December could be only half a point, not three quarters.
Typically, the Fed raises interest rates in quarter-point increments. But after he misjudged downplaying inflation last year as likely transient, Powell pushed the Fed to raise interest rates sharply to try to slow borrowing and spending and ease price pressures.
Wednesday’s latest rate hike coincided with growing concerns that the Federal Reserve could tighten credit as much as derailing the economy. The government reported that the economy grew in the last quarter, and employers are still hiring at a solid pace. But the housing market is crashing, and consumers are hardly increasing their spending.
Mortgage buyer Freddy Mac reported that the average 30-year fixed-rate mortgage rate, which was just 3.14% a year ago, topped 7% last week. Existing home sales have declined for eight consecutive months.
Blerina Uruci, an economist at T. Rowe Price, suggested that the decline in home sales is the “coal mine canary” that shows that the Fed’s rate hike is weakening an interest-sensitive sector such as housing. Orochi noted, though, that the Fed’s hikes have not yet appreciably slowed much of the rest of the economy, particularly the labor market or consumer demand.
“As long as these two components remain strong,” she said, Fed policymakers “can’t count on low inflation” near their 2% target over the next two years.
Several Federal Reserve officials recently said they had yet to see meaningful progress in their battle against rising costs. Inflation rose 8.2% in September from 12 months earlier, just below its highest rate in 40 years.
However, policy makers may feel they can slow down the pace of interest rate hikes soon because some early indications are that inflation may start to fall in 2023. Consumer spending, squeezed by higher prices and more expensive loans, is barely growing. Supply chain crises are receding, which means fewer shortages of goods and parts. Wage growth is flat, which, if followed by a decline, would reduce inflationary pressures.
However, the labor market remains consistently strong, which could make it difficult for the Fed to calm the economy and rein in inflation. This week, the government reported that companies announced more jobs in September than they did in August. There are now 1.9 jobs available for every unemployed worker, which is an unusually large supply.
A higher ratio means that employers will likely continue to raise wages to attract and retain workers. Higher labor costs are often passed on to customers in the form of higher prices, which leads to increased inflation.
Ultimately, economists at Goldman Sachs expect Fed policymakers to raise the key interest rate to nearly 5% by March. This is higher than the Fed itself had forecast in its previous set of forecasts in September.
Outside the US, many other major central banks are also rapidly raising interest rates to try to cool above-US inflation levels.
Last week, the European Central Bank announced a second rate hike in a row, raising rates at the fastest pace in the history of the euro currency in a bid to curb inflation that soared to a record 10.7% last month.
Similarly, the Bank of England is expected to raise interest rates on Thursday in a bid to ease consumer prices, which rose at their fastest pace in 40 years, to 10.1% in September. Even as rates are raised to combat inflation, both Europe and the UK appear to be heading into recession.
“Travel specialist. Typical social media scholar. Friend of animals everywhere. Freelance zombie ninja. Twitter buff.”
More Stories
Taiwan is preparing to face strong Typhoon Kung-ri
Israel orders residents of Baalbek, eastern Lebanon, to evacuate
Zelensky: North Korean forces are pushing the war with Russia “beyond the borders”