The Federal Reserve raises interest rates by 0.75% for the fourth time in a row

(CNN) — The United States Federal Reserve on Wednesday announced a 0.75% increase in interest rates for the fourth time in a row, as part of its aggressive strategy to reduce the rampant inflation affecting the country’s economy.

The sharp increase leaves the Federal Reserve’s benchmark interest rate with a new target range of 3.75% to 4%. This is the Fed’s highest rate since January 2008.

The decision, which comes after a two-day meeting of the Federal Open Market Committee, represents the Federal Reserve’s strongest action since 1980. It is also likely to complicate the economic outlook for millions of American businesses and households by further raising the cost of borrowing.

There is also a possibility that it will cause a recession.

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Although Federal Reserve Chairman Jerome Powell has emphasized that persistent and entrenched inflation represents more economic pain than recession, he also acknowledged the difficulties that come from tightening monetary policy.

“I wish there was a painless way to do it. There isn’t,” he said last September.

Federal Reserve


In its announcement Wednesday, the Fed included a new section, something unusual because the bank typically repeats the same language in each report. The Federal Open Market Committee, the central bank’s policymaking arm, said it “anticipates that continued increases in the target range will be appropriate to achieve a monetary policy stance that is sufficiently tight to return inflation to 2%” over time.

Experts could interpret the addition of “over time” to the inflation indexes as meaning that the Fed will move away from aggressive rate hikes toward smaller but longer-term increases.

In addition, the statement stated that: “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial factors.”

The Fed’s new language could also pave the way for eventual rate easing, as it recognizes that monetary policy could effectively cool the economy even as economic data — often lagging — points to a slowdown in strong growth.

Wall Street could also see such language as a response to a wave of criticism against the Fed for overly aggressive interest rate hikes and subsequent unnecessary damage to the economy.

Recent data only underscores the do-it-yourself adventurous side of the American economy: Mortgage rates at levels not seen in nearly 20 years are beginning to choke the housing market, while new home sales fell 10 percent. .9% in September compared to August and 17.6% compared to the previous year.

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However, some inflationary pressures are easing. Wages and salaries rose 1.2% in the third quarter, compared with 1.6% in the second, according to the employment cost index.

And yet, the labor market remained tight. Vacancies rose unexpectedly in September, which means that there are 1.9 jobs for every unemployed worker. The next jobs report on Friday is expected to show the economy added 205,000 new jobs in October, down from last month but still a historically high level.

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