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he Federal Reserve plowed ahead on Wednesday announcing an interest rate hike of 0.75 percentage points, with the fifth straight since March and the fourth historically large interest rate hike, in its effort to slow down or halt the soaring inflation.
The rate-hike matches investor expectations and will bump the range of the federal interest rate to between 3.75-4%.
But as the Fed’s monthslong campaign increasingly risks a recession next year, the main question now is, will it dial back the rate hikes in December or wait until inflation shows clear signs of abating?
At a news conference, Fed Chair Jerome Powell said the Fed could slow the pace of hikes as soon as next month. “That time is coming and it may come as soon as the next meeting or the one after that,” Powell said.
Powell added, “The Fed isn’t close to pausing its rate hike campaign and need to boost rates a good bit more to reach a level that’s sufficiently restrictive to lower inflation to the Fed’s 2% target. The concern is that inflation could become ‘entrenched’ in the expectations of consumers and businesses and the Fed must move decisively to head off such a dynamic.
Powell added, It’s very premature to be thinking about pausing. We have a way to go. Citing recent high inflation figures, rates could well rise above the 4.5% to 4.75% range that Fed officials previously anticipated.