The Federal Reserve reinforced its fight against high inflation by raising its key interest rate by a quarter-point to the highest level in 16 years.
In a statement after its latest policy meeting, the Fed removed a sentence from its previous statement that had said “some additional” rate hikes might be needed. It replaced it with language that said it will now weigh a range of factors in “determining the extent” to which future hikes might be needed.Speaking at a news conference, Chair Jerome Powell said the Fed has yet to decide whether to suspend its rate hikes.
The Fed chair stressed his belief that the collapse of three large banks in the past six weeks will likely cause other banks to tighten lending to avoid similar fates. Such lending cutbacks, he added, will likely help slow the economy, cool inflation and lessen the need for the Fed to further raise rates.
Still, if inflation were to accelerate, the Fed “won’t hesitate to resume hiking interest rates because they’re determined to break inflation’s back,” said Ryan Sweet, chief economist at Oxford Economics. “As such, there is a risk that the pause is temporary.” In its statement and at Powell’s news conference, the Fed made clear Wednesday that it doesn’t think its string of rate hikes have so far sufficiently cooled the economy, the job market and inflation. Inflation has dropped from a peak of 9.1% in June to“Inflation pressures continue to run high, and the process of getting getting inflation back down to 2% has a long way to go,” Powell said.
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