The Fed pumped up its benchmark interest rate by three-quarters of a point but chief Jerome Powell hinted that it could soon reduce the size of its rate hikes.
The Federal Reserve pumped up its benchmark interest rate by three-quarters of a point for a fourth straight time but hinted that it could soon reduce the size of its rate hikes.
Powell said is it would be appropriate to slow the pace of increases “at some point” but cautioned that predicting a smaller rate hike at the next meeting was “very premature”. His comments“That time is coming and it may come as soon as the next meeting or the one after that. No decision has been made,” he said, while stressing that “we still have some ways” before rates were tight enough.
Wednesday’s latest rate increase coincided with growing concerns that the Fed may tighten credit so much as to derail the economy. The government has reported that the economy grew last quarter, and employers are still hiring at a solid pace. But the housing market has cratered, and consumers are barely increasing their spending.
Several Fed officials have said recently that they have yet to see meaningful progress in their fight against rising costs. Inflation rose 8.2 per cent in September from 12 months earlier, just below the highest rate in 40 years. A ratio that high means that employers will likely continue to raise pay to attract and keep workers. Those higher labour costs are often passed on to customers in the form of higher prices, thereby fuelling more inflation.Ultimately, economists at Goldman Sachs expect the Fed’s policymakers to raise their key rate to nearly 5 per cent by March. That is above what the Fed itself had projected in its previous set of forecasts in September.
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