Federal Reserve raises interest rates another 0.75 percentage points

The Federal Reserve raised its key interest rate by another three-quarters of a percentage point as it battles the highest inflation in decades.

The decision by the central bank’s rate-setting committee, announced after a two-day meeting on Wednesday, marks the sixth rate hike this year and the fourth consecutive hike of 0.75 percentage points since June. The massive hike was widely expected by Wall Street as inflation remained stubbornly high despite the Fed’s aggressive campaign to rein in sharply rising prices.

The Fed’s target rate is now between 3.75% and 4%.

Rising rates change how much banks pay to borrow money from the Fed, which in turn affects how much does it cost consumers and businesses to borrow and fuels rates for mortgages, credit card debt and auto loans. Rate hikes to date have caused average mortgage rate above 7%its highest level in 20 years.

Fed hints it may slow pace of rate hikes

Despite another big hike in the federal funds rate, policymakers have hinted they are ready to slow the pace of the hikes as their monetary tightening slows the economy.

“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 developments.” , he said in a statement. , which also noted “modest growth” in spending and output.

The Fed has raised its key rate by another 75% [basis points] today between 3.75% and 4.00%, but laid the groundwork in the attached statement for a likely decline to a 50 basis point rise at the next meeting in mid- December,” Paul Ashworth, chief North American economist at Capital Economics, in a “Markets interpreted the change in tone as dovish.”

Shares jumped on the news, reversing earlier losses, as investors cheered a signal from the Fed that it might slow its bullish cycle. The Dow jumped to 32,937 shortly after 2 p.m., a change of 1.3%.

“The Fed’s forward guidance has moved in a dovish direction,” Wall Street analyst Adam Crisafulli of Vital Knowledge told investors in a client note. “Previously, the Fed was just saying that future rate hikes would be appropriate. However, there is now a lot more text, and most importantly, the Fed is saying that it will take into account existing tightening measures, the lagged effect of politics and “economic and financial developments”.

Fed Chairman Jerome Powell began speaking to reporters at 2:30 p.m. Eastern Time, detailing the bank’s economic outlook.

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