The Federal Reserve has raised its rate by 0.75 % once more
With prices rising faster than in a generation, the Fed is fighting inflation harder.
The Fed hiked its benchmark interest rate by 0.75% on Wednesday. It is the fourth rate hike this year.
Similar rate hikes have not happened since the late 1980s.
Despite these quick steps, the central bank has work to do. It aims to curb inflation without causing a recession.
Fed Chair Jerome Powell said the tight labour market and strong inflation prompted the “unusually large” rate hike.
His colleagues are fighting inflation by reducing demand. They are raising the cost of credit — what consumers and firms pay to borrow money — and dealing with a “unsustainably hot,” jobs market, where wages are growing rapidly because employers are paying more to recruit people.
Spending and production have weakened, the Fed said. It observed “job gains have been robust in recent months, and the unemployment rate has remained low.” and a low unemployment rate.
The purpose is to combat inflation, which is 9.1%, the highest in four decades. The Fed said that pandemic supply chain difficulties and the Russia-Ukraine war are pushing up food and energy prices.
Powell: “My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation,”
Powell noted economic uncertainties. However, he is seeking to achieve an economic “soft landing”
For that, the Fed is raising interest rates. But it is neither accurate nor easy. As authorities hike rates, GDP will decelerate and unemployment will rise from its pre-pandemic low.
The Fed wants measured modifications, but that is hard to execute.
In June, inflation climbed 9.1% from a year earlier, and the Fed faces a crisis it can not control.
The central bank can handle demand, which soared as the U.S. emerged from the pandemic, but it can not address supply chain concerns or halt the Ukraine war, both of which have led to rising prices, especially for fuel and food.