HomeNationalFed Hikes Rates Big, Signals Possible Lower Rises AheadOUS News

Fed Hikes Rates Big, Signals Possible Lower Rises AheadOUS News

The Federal Reserve on Wednesday raised interest rates by three-quarters of a percentage point as it continued to battle the worst inflation spike in 40 years, but signaled that future increases in borrowing costs could be done in smaller steps to account for “cumulative tightening”. of monetary policy” that it has adopted so far.

The new wording of the policy statement took note of the still-evolving impact that the rapid pace of Fed rate hikes has set in motion, and a desire to focus on a level for the federal funds “sufficiently restrictive to reduce inflation to 2″. % over time.”

“Continued increases in the target range will be appropriate,” the U.S. central bank said at the end of its latest two-day policy meeting. Without ruling out any future decisions, the officials said: “In determining the pace of future increases in the target range, the (Federal Open Market) Committee will take into account the cumulative tightening of monetary policy, the lags with which the monetary policy affects economic activity. and inflation, and economic and financial developments.

The language acknowledges the broad debate that has emerged around Fed policy tightening, its impact on the U.S. and global economies, and the danger that continued steep rate hikes could stress the financial system or trigger a recession.

While its recent rapid increases were made in the name of a “quick” move to catch inflation to more than three times the Fed’s 2% target, the central bank is now entering a more nuanced phase – refine instead of “front-loading.”

The policy decision set the target federal funds rate in a range between 3.75% and 4.00%, the highest since the start of 2008. The US central bank raised rates at its last six meetings to from March, marking the fastest round of rate hikes since former Fed Chairman Paul Volcker’s struggle to control inflation in the 1970s and 1980s.

The Fed statement said officials remained “highly attentive to inflation risks,” opening the door for further hikes.

The economy, the Fed noted, appears to be growing modestly, with still “robust” job gains and low unemployment.

Fed Chairman Jerome Powell will detail the central bank’s plans and outlook at a press conference scheduled for 2:30 p.m.