The US Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point for the second consecutive time on Wednesday, its strongest attempts in more than three decades to rein in inflation.
With this, the rate used for many personal and business loans rises to a range between 2.25% and 2.5%, its highest level since 2018.
At a news conference after the central bank’s most recent policy meeting, its chairman, Jerome Powell, offered mixed signals about possible next moves. He underscored that the Fed remains committed to reining in chronically high inflation, though he also left open the possibility that it might soon opt for less steep rate hikes.
And even as concerns are growing that the Fed’s actions could spark a recession, Powell refrained from saying the central bank would slow its rate hikes if a recession hits while inflation was still high.
Roberto Perli, an economist at investment bank Piper Sandler, said Powell emphasized that “even if it causes a recession, bringing down inflation is important.”
But Powell’s hint that the pace of the Fed’s hikes could be slowed now that the key rate is at a level that is believed neither to promote nor constrain growth helped give a strong boost to Wall Street, where the S&P 500 indicator is lower. shot 2.6%. The prospect of lower interest rates tends to benefit stock markets.
At the same time, Powell was cautious during his press conference not to rule out a further three-quarter point hike during the next Fed meeting in September.
Amnesty.
The US central bank’s decision followed a sharp rise in inflation to 9.1%, its fastest annual pace in 41 years, and reflects its efforts to limit price increases in all sectors of the economy.
Internal fight.
By raising interest rates, the Fed makes it more expensive to get a mortgage, car or business loan. This causes people and companies to borrow less.
