The Fed raises interest rates by 0.75 points for the fourth time in a row

The Fed raises interest rates by 0.75 points for the fourth time in a row

The Federal Reserve raised its benchmark interest rate by 0.75 percentage points on Wednesday for the fourth time in a row as it made progress in its long-running battle to reduce persistently high US inflation.

The Federal Open Market Committee voted unanimously to raise the federal funds rate to a new target range of 3.75 percent to 4 percent after its latest two-day meeting. The fourth straight rate hike comes as the U.S. central bank tries to curb price pressures in an economy that is proving more resilient than expected in the face of its monetary tightening campaign.

In a statement, the US central bank said a “sustained increase” in the Fed funds rate would be needed to have a “sufficiently restrictive” impact on the economy and return inflation to the Fed’s long-term target of 2 percent.

The Fed’s decision to press ahead with another big rate hike comes amid mounting evidence that the most acute inflation the problem has not subsided for decades. This is despite signs that consumer demand is starting to cool and that the housing market has slowed significantly under the weight of rising mortgage rates, which rose above 7 percent last week.

Data released since the September meeting showed that consumer price growth is accelerating again across a broad spectrum of goods and services, indicating that core inflationary pressures are becoming stronger. The the labor market also remains very tightwith strong wage growth and job creation again.

Wednesday’s decision moved the federal funds rate further into “restrictive” territory, meaning it will more strongly stifle economic activity.

Given how far Fed has already raised rates — from near zero as recently as March — top officials and economists are having increasingly urgent discussions about when the U.S. central bank should slow the pace of rate hikes, especially as monetary policy changes take time to filter through the economy.

The Fed first floated the notion of slowing “at some point” back in July, and forecasts released at its September meeting suggested support for such a move in December. At the September meeting, most officials projected the federal funds rate would reach 4.4 percent by the end of the year, indicating a move to a half-point rate hike next month.

Economists are concerned that by extending its aggressive tightening program, the Fed risks provoking more pronounced economic decline than necessary, as well as instability in the financial markets. Some Fed watchers warn that recent developments in the UK government bond market, which required the Bank of England to step in, offer a cautionary tale.

Democratic lawmakers also called on the Fed to back off its aggressive approach.

However, Fed Chairman Jay Powell will be under pressure to convince economists and investors that the slowdown in the pace of interest rate increases does not mean a reduced commitment to curbing price pressures. To that end, many economists expect the Fed to eventually cut rates beyond the 4.6 percent peak planned for September. A key policy rate of at least 5 percent is now expected to be needed to tame inflation.

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