Fed raises interests rates .75-point for historic fourth time, hints at slower future raises
The Federal Reserve hiked the key lending rate another three-quarter percentage point to its highest level since 2008 Wednesday afternoon.
This is the fourth .75-point raise in the year as the central bank attempts to bring stubbornly high inflation down.
However, Fed Chair Jerome Powell said, a rate slowdown may be around the corner.
“At some point it will become appropriate to slow the pace of increases,” Powell said at a press conference. “That time is coming. And it may come as soon as the next meeting or the one after that. No decision has been made.”
Following the indication of slower increases, stocks in the U.S. surged — the Dow rising 300 points or 0.9% and the S&P 500 up 0.5% after the announcement Wednesday.
Powell said the increases will continue though, and importantly, the ultimate rise may be higher than previously expected.
“Incoming data between the meetings, both the strong labor market report but particularly the CPI report, do suggest to me that we may ultimately move to higher levels than we thought at the time of the September meeting,” Powell said.
How high rates may have to go to return inflation back to the target 2% is still uncertain.
The economy is currently rife with mixed signals, leaving economists widely mixed on the state and outlook of the economy.
A measure of inflation, core Personal Consumer Expenditure prices, rose 5.1% in the 12 months through September, still far above the target 2%. A slowdown in growth and spending has also reflected lower disposable income and tighter financial conditions for many families.
Real GDP shrank for two quarters this year — usually a sign of a recession — but rose in the most recent quarter 2.6%.
And the labor market has remained unusually strong, with unemployment at a 50-year low, job vacancies high and wage growth elevated.
Powell said despite the long road, the Fed is still hopeful for a “soft landing,” meaning bringing inflation down without hugely costing jobs and growth.
“To the extent rates have to go higher and stay higher for longer becomes harder to to see the path,” Powell said. … “All I would say is the job losses may turn out to be less than would be indicated by traditional measures, because job openings are so elevated, and because the labor market is so strong.
“No one knows whether there’s going to be a recession or not, and if so, how bad that recession would be,” the chair continued. “Our job is to restore price stability so that we can have a strong labor market that benefits all over time. And that’s what we’re going to do.”
from Boston Herald https://ift.tt/jfUZYz1
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