Powell said the likely path of interest rates that the Fed outlined earlier this year - in which rates rise to about 3.5 percent this year - remains reasonable. “But that is not a decision we have made at all.” “We might do another unusually large rate increase,” Mr. Officials could keep raising rates briskly in September, or they could ease off the pace, depending on how the economy evolves. The Fed began raising interest rates from near-zero in March, and policymakers have picked up the pace sharply since in reaction to incoming economic data, as price increases have continued to accelerate at an alarming rate.Īfter making a quarter-point move to start, the central bank raised rates by half a point in May and by three-quarters of a point in June, which was the largest single step since 1994. “This is an even more data-dependent Fed - and it is going to come down to whether inflation gives them the space to slow down.” “There’s a lot of information between now and the September meeting, and I think markets will reassess,” said Priya Misra, head of Global Rates Strategy at TD Securities. Powell’s comments aligned with the message Fed officials have consistently sent: Inflation is too high, the central bank is determined to crush it, and interest rates are likely to further increase this year. Some rates strategists asked why, because Mr. Stocks surged after the Fed’s decision and Mr. “We don’t want this to be bigger than it needs to be, but ultimately, if you think about the medium to longer term, price stability is what makes the whole economy work.” But the Fed chair stressed that the economic sacrifice today was necessary to put America back on a sustainable longer-term path with slow and predictable price increases. That has made the central bank’s rate increases unwelcome among some Democrats, who argue that crushing the economy is a crude way to lower today’s inflation rate. Powell acknowledged that the Fed’s policy changes were likely to inflict some economic pain - in particular, weakening the labor market. Powell, the Fed chair, said during a news conference after the meeting that such a cool-down was needed to allow supply to catch up with demand so that inflation could moderate. The central bank’s brisk moves are intended to slow the economy by making it more expensive to borrow money to buy a house or expand a business, weighing on the housing market and economic activity more broadly. The decision on Wednesday puts the Fed’s policy rate in a range of 2.25 to 2.5 percent. WASHINGTON - The Federal Reserve continued its campaign of rapid interest rate increases on Wednesday, pushing up borrowing costs at the fastest pace in decades in an effort to wrestle inflation under control.įed officials voted unanimously at their July meeting for the second supersized rate increase in a row - a three-quarter-point move - and signaled that another large adjustment could be coming at their next meeting in September, though that remains to be decided.
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