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FED's Fourth consecutive increase.

 


Jay Powell has signalled that the Federal Reserve is prepared to slow the pace of its campaign to tighten monetary policy but warned that interest rates would ultimately have to rise to a higher level than previously expected. Speaking after the US central bank increased its primary interest rate by 0.75 percentage points for the fourth consecutive time, the Fed chair said the bank would not need to see a series of monthly lower inflation readings before switching to smaller increases. Powell's comments suggest policymakers are willing to entertain the possibility of opting for less aggressive growth at the Fed's next meeting. "We still have some ways to go, and economic data since our last meeting suggests that the ultimate level of interest rates will be higher than expected," Powell said in a press conference yesterday after the Fed's two-day meeting.

Markets struggled to interpret the Fed's stance, with stocks jumping after the statement's release before sinking when Powell warned that rates would top out at a higher "terminal" level. Powell spoke after the Federal Open Market Committee voted unanimously to increase the federal funds rate to a target range of 3.75 per cent to 4 per cent. The US central bank said that "ongoing increases" in the fed funds rate would be necessary to have a "sufficiently restrictive" impact on the economy and bring inflation back to the Fed's longstanding 2 per cent target. The Fed's decision to press ahead with another 0.75 percentage point rate rise comes against mounting evidence that the most acute inflation problem in decades is not decreasing.

That is despite signs consumer demand is starting to cool and that the housing market has slowed significantly under the weight of spiralling mortgage rates, which last week rose above 7 per cent. At September's meeting, most officials projected the fed funds rate reaching 4.4 per cent by the end of the year.

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  1. Kyle3 November 2022 at 11:14

    They projected the fed funds rate reaching 4.4 per cent by the end of the year but I think it's going to be more than this (maybe 4.8%+). Consumer demand is slowing down and it will go even lower soon enough. We are in for a tough winter that's for sure.

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