After 15 months, the FederalReserve is hitting the brakes on its aggressive campaign to tame inflation as prices continue to relent — at least for now. By forgoing another increase, the Fed hopes to allow more time for previous hikes to take full effect.
After 15 months, the Federal Reserve is hitting the brakes on its aggressive campaign to tame inflation as prices continue to relent — at least for now.
The Fed’s pause, widely expected by financial observers, is likely to come as some relief for Americans with debt who have been faced with paying higher interest rates, as well as those looking to take on new loans, whether for a car or home. It also underscores the delicate balance policymakers have sought to strike as they attempt to tame inflation without unleashing a recession.
The Fed also released its most recent economic projections on Wednesday, showing that it expects the core personal consumption expenditures index, another measure of inflation that’s closely watched by the central bank, to remain higher than expected this year. In its March projections, the Fed forecast core PCE to drop to 3.6%. However, the central bank has now raised that projection to 3.9%.
The Fed, facing swelling consumer prices, especially for food and fuel, started raising interest rates in March 2022 after keeping them low for four years. Russia’s invasion of Ukraine a month prior, as well as subsequent Western sanctions on the Russian energy sector, had helped spike prices at the pump. Meanwhile, ongoing global supply chain woes, at a time when consumer spending and demand had shot up, also contributed to soaring costs.
The Fed, and Powell specifically, have faced criticism from both Republicans and Democrats for how the central bank has handled inflation. Progressives such as Sen. Elizabeth Warren on the Senate Banking Committee have lambasted Powell for maintaining strict economic policy, despite the risk of job losses and a recession.
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