Fed plans to raise rates much more as concerns about a recession grow

November 2, 2022

This week, the US Federal Reserve is expected to raise the benchmark interest rate sharply for the fourth time in a row as it confronts rising costs, sparking fears of an impending recession.

Rising consumer costs have put a strain on American households, making economic concerns the top issue on voters’ minds in the upcoming midterm elections. Fed officials attempt to control prices while preventing a downturn by walking a tightrope.

The US central bank has already increased the benchmark lending rate five times this year, including three straight increases of 0.75 percentage points, in an effort to increase borrowing costs and reduce demand.

However, economists claim that another 0.75 point increase at central bankers’ next policy meeting is all but guaranteed because of consistently strong inflation and a tight labor market boosting wages and spending.
Numerous economists anticipate that the Fed will increase interest rates in December by another half point.

Jerome Powell, the chair of the Federal Reserve, has made it clear that there is no “painless method” to slow down the economy and prevent a recurrence of the 1970s and early 1980s inflation crisis, when the US inflation rate last spiraled out of control.

Mortgage rates recently reached their highest levels in decades, and home sales have fallen as a result of the Fed’s policies.

Additional Fed rate increases are also anticipated to reduce consumer and company expenditure, making saving more appealing than spending.

According to analysts, the economy may experience a recession in 2023 as a result of the Fed’s rate hikes, inflation, and a slowdown in global growth.

Source: rfi.fr
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.