The US Federal Reserve is poised to raise borrowing costs Wednesday amid the troubling acceleration of inflation, with the only question being whether officials will opt for the biggest hike in nearly three decades or a smaller step up.
The central bank seemed set to increase the benchmark interest rate again by 0.5 percentage points, but a resurgence of consumer and producer prices in May has fueled growing speculation of a 75-basis-point hike.
If policymakers decide on a giant step, it would be the first 75-basis-point increase since November 1994. President Joe Biden has fully endorsed the Fed's battle against the steepest rise in prices in more than 40 years, as he watches inflation erode his popularity and deflect attention from other milestones, including a rapid recovery of the world's largest economy and record job growth.
The Fed was caught off guard with the speed of the price increases, and while policymakers usually like to clearly signal any policy shift to financial markets, the latest data likely changed the calculus. Markets are now pricing in at least one three-quarter-point hike by the end of the year and an aggressive path at the other four meetings."Fed officials are worried a bit about losing credibility," he said at an event hosted by The Wall Street Journal.
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