The Fed's quarter-point hike in its key rate marks the start of its effort to curb the high inflation that has followed the recovery from the recession.
The Fed's quarter-point hike in its key rate, which it had pinned near zero since the pandemic recession struck two years ago, marks the start of its effort to curb the high inflation that followed the recovery from the recession. The rate hikes will eventually mean higher loan rates for many consumers and businesses.
People are also reading… “All signs are that this is a strong economy," Powell said,"one that will be able to flourish in the face of less accommodative monetary policy.” In a statement it issued after its latest policy meeting, the Fed noted that Russia's invasion of Ukraine and ensuing sanctions by the West “are likely to create additional upward pressure on inflation and weigh on economic activity.”
One member of the Fed’s rate-setting committee, James Bullard, head of the Federal Reserve Bank of St. Louis, dissented from Wednesday’s decision. Bullard favored a half-point rate hike, a position he has advocated in interviews and speeches. Yet many economists worry that with inflation already so high — it reached 7.9% in February, the worst in four decades — and with Russia's invasion of Ukraine driving up gas prices, the Fed may have to raise rates even higher than it now expects and potentially tip the economy into recession.
By its own admission, the central bank underestimated the breadth and persistence of high inflation after the pandemic struck. Many economists say the Fed made its task riskier by waiting too long to begin raising rates.
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