Newsman: The Federal Reserve is expected to order another big boost in interest rates Wednesday. The central bank has already raised its benchmark interest rate by 3 percentage points since March, and it’s expected to tack on another 3/4 of a point at this week’s meeting. That’s the most aggressive string of rate hikes in decades. “A 75 basis-point hike from the Fed this week is practically a done deal. The much bigger question is around how the Fed signals its future policy path,” according to experts. It would be a fourth-straight rate hike of three-quarters of a percentage point as part of an aggressive battle to bring down the white-hot inflation that is plaguing the US economy.
According to economist and experts, millions of American businesses and households will likely be in deepen economic pain by pushing up the cost of borrowing even further. There’s also a chance it could trigger a recession.
The supersized hike would bring the central bank’s benchmark lending rate to a new target range of 3.75% to 4%. That’s the highest the fed funds rate has been since January 2008.
Fed Chair Jerome Powell has stressed that persistent, entrenched inflation would bring greater economic suffering than a recession would, he has also acknowledged the economic hardships that result from tightening monetary policy.
“I wish there were a painless way to do that. There isn’t,” he said in September.
Annual inflation in September was 6.2%, according to the Fed’s preferred yardstick — unchanged from the month before. The better known consumer price index shows prices rising even faster, at an annual rate of 8.2%.
Wednesday’s decision, which comes at the end of a two-day policy meeting of the Federal Open Market Committee, would also mark the Fed’s toughest policy move since the 1980s.
Recent data only underscores the “choose your own adventure” aspect of the US economy: Mortgage rates at levels not seen in almost 20 years are beginning to choke the housing market. Sales of newly constructed homes dropped 10.9% in September from August and were down 17.6% from a year ago.
Yet some inflationary pressures are easing. Wages and salaries rose by 1.2% in the third quarter, down from 1.6% in the second, according to the Employment Cost Index.
And through it all, the job market has remained tight. Job openings unexpectedly surged in September, indicating there are 1.9 job openings for every available worker. Friday’s upcoming jobs report is expected to show the economy added another 205,000 positions in October, down from last month but still historically high.
