Says they will hit 4.4% this year in push to tame soaring inflation
- Fed is attempting to cool down the economy to battle soaring inflation
- Higher rates mean costlier borrowing, including mortgages and business loans
- But by tamping down the economy, the risk of sharp job losses is rising
- Fed Chair Powell warned Americans will be in for ‘some pain’ as rates rise
The Federal Reserve has issued another super-sized increase to interest rates, deepening the risks of a sharp economic downturn and job losses.
At the end of its two-day policy meeting on Wednesday, the US central bank raised its policy rate by 75 basis points for the third time, to a range of 3 percent to 3.25 percent, the highest level since the 2008 financial crisis.
The Fed is attempting to cool down the economy in order to tame rampant inflation, which remains stubbornly high at 8.3 percent — but as interest rates climb, the path to a so-called ‘soft landing’ for the economy is narrowing.
Economists had expected Fed officials to forecast that their key rate could go as high as 4 percent before the new year.
They’re also likely to signal additional hikes in 2023, perhaps to as high as roughly 4.5 percent.
Short-term rates at that level would make a recession likelier next year by sharply raising the costs of mortgages, car loans and business loans.
Earlier this month, Powell warned that Americans are in for ‘some pain’ ahead as the Fed works to end inflation, hoping to prevent what would otherwise be an even more dire outcome.
The Fed intends to use higher borrowing costs to slow growth by cooling a still-robust job market, controlling wage growth and other inflation pressures.
Yet the risk is growing that the Fed may weaken the economy so much as to cause a downturn that would produce heavy job losses.
