Washington, Sept 21 (AFP\/APP):The Federal Reserve raised the key US interest rate again Wednesday and said more hikes are coming as it battles soaring prices — an aggressive stance that has raised fears of a recession.<\/p>\n
And Federal Reserve Chair Jerome Powell warned that the process of conquering inflation will involve some pain.<\/p>\n
It was the third consecutive increase of 0.75 percentage point by the Fed’s policy-setting Federal Open Market Committee (FOMC), continuing the forceful action to tamp down inflation that has surged to the highest in 40 years.<\/p>\n
The increase — the fifth one this year — takes the policy rate to 3.0-3.25 percent, and the FOMC said it “anticipates that ongoing increases… will be appropriate.”<\/p>\n
Soaring prices are putting the squeeze on American families and businesses, and have become a political liability for President Joe Biden as he faces midterm congressional elections in early November.
\nBut a contraction of the world’s largest economy would be a more damaging blow to Biden, and the world at large.<\/p>\n
Powell has made it clear that officials will continue to act aggressively to cool the economy and avoid a repeat of the 1970s and early 1980s, the last time US inflation got out of control.<\/p>\n
It took tough action — and a recession — to finally bring prices down in the 1980s, and the Fed is unwilling to give up its hard-won, inflation-fighting credibility.<\/p>\n
Powell said the US central bank is committed to raising interest rates and keeping them high until inflation comes down, and he warned against reversing course too soon.<\/p>\n
“The historical record cautions strongly against prematurely loosening policy,” Powell told reporters.<\/p>\n
He said there is no room for complacency and the Fed will “keep at it until the job is done,” although at some point it will be appropriate to slow the pace of rate increases, depending on the data.<\/p>\n
– Pain –<\/p>\n
He acknowledged that bringing inflation down will require a period of slower growth and higher unemployment, noting that the job market is out of sync, with far more openings than workers.<\/p>\n
“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t.”<\/p>\n
But he said continued high inflation would be even more painful, especially on those least able to withstand it.<\/p>\n
The Fed’s quarterly forecasts released with the rate decision Wednesday show FOMC members expect US GDP growth to virtually flatline this year, rising just 0.2 percent. But they see a return to expansion in 2023, with annual growth of 1.2 percent.<\/p>\n
They project further rate hikes this year — totaling 1.25 percentage points — and more in 2023, with no cuts until 2024.<\/p>\n
While the FOMC noted continued “robust” job gains in recent months and low unemployment, the forecasts project the jobless rate will rise to 4.4 percent next year and hold around that level through 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"
Washington, Sept 21 (AFP\/APP):The Federal Reserve raised the key US interest rate again Wednesday and said more hikes are coming as it battles soaring prices — an aggressive stance that has raised fears of a recession. And Federal Reserve Chair Jerome Powell warned that the […]<\/p>\n
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