In a further sign of the Fed’s deepening concern about inflation, it will also likely signal that it plans to raise rates much higher by year’s end than it had forecast three months ago - and to keep them higher for a longer period.Įconomists expect Fed officials to forecast that their key rate could go as high as 4% by the end of this year. READ MORE: ‘No guarantee’ Fed can tame inflation without hurting employment, Powell warns Another hike that large would lift its benchmark rate - which affects many consumer and business loans - to a range of 3% to 3.25%, the highest level in 14 years. The Fed is expected at its latest meeting to raise its key short-term rate by a substantial three-quarters of a point for the third consecutive time. Please contact us for subscription options.WASHINGTON (AP) - Federal Reserve Chair Jerome Powell bluntly warned in a speech last month that the Fed’s drive to curb inflation by aggressively raising interest rates would “bring some pain.” On Wednesday, Americans may get a better sense of how much pain could be in store. Powell said the Fed still aims to achieve a soft-landing - a process where a central bank raises rates against high inflation and causes an economic slowdown but avoids a recession.Īnadolu Agency website contains only a portion of the news stories offered to subscribers in the AA News Broadcasting System (HAS), and in summarized form. "The GDPNow model estimate for real GDP growth in the second quarter of 2022 is -1.2% on July 27," according to the Atlanta Fed. "The slowdown in the second quarter is notable, we are going to be watching that carefully," said Powell.īut the Atlanta Fed's GDP model on July 1 showed that the economy is already in recession. The US economy contracted 1.6% in the first quarter, while the first reading of the second quarter gross domestic product (GDP) will be released Thursday. It does not make sense that the economy would be in a recession with this kind of thing happening," he added. The reason is that there are too many areas of the economy that are performing too well," he said. "I do not think the US is currently in a recession. While the Fed's aggressive monetary tightening has created fears of a recession in the world's largest economy, Powell tried to calm those worries. He also said the continued strength of the labor market suggests that underlying aggregate demand in the American economy remains "solid." "My colleagues and I are strongly committed to bring inflation back down and we are moving expeditiously to do so," he said. Powell noted that the PCE (personal consumption expenditures) price index, the Fed's preferred inflation indicator, annually rose 6.3% in May, saying "supply constraints have been larger and longer than anticipated and price pressures are evident across a broad range of goods services." "It will likely be appropriate to slow the pace of increases, while we assess how our cumulative policy adjustments are affecting the economy and inflation," he said. Powell called the current rate increase the "right magnitude" based on macroeconomic data but said the FOMC would not hesitate to make a larger rate hike move.īut he indicated that increases could slow at some point.
That was after the Fed increased its benchmark interest rate by another 75 basis points June 15 - the largest hike in 28 years. "While another unusually large increase could be appropriate at our next meeting, that is a decision on the data we get between now and then," Powell said at a news conference after the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to the 2.25% - 2.5% range with a hike of 75 basis points.
US Federal Reserve Chair Jerome Powell said Wednesday that another "unusually large" interest rate increase is possible at the central bank's next meeting in September.
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