The Federal Reserve increased its benchmark interest rate by three-quarters of a percent on Wednesday for the fourth consecutive time, but it signaled that it would soon scale back the pace of its rate increases.
With the Fed’s action, the short-term benchmark rate reached its highest level in 15 years, fluctuating between 3.75% and 4%. It was the central bank’s sixth rate increase of the year, a trend that has increased the cost of consumer and commercial loans overall and raised the possibility of a recession.
However, the Fed hinted in a statement that it would soon switch to a slower rate of rate rises. It declared that it would evaluate the overall effects of its significant rate hikes on the economy in the months to come.
It stated that it takes time for rate increases to impact inflation and growth fully.
These statements suggested that the Fed’s policymakers may believe that rising borrowing costs may eventually slow the economy and lower inflation.
If that’s the case, it might mean they don’t need to hike rates as swiftly as they have been.
However, for the time being, the persistence of high borrowing costs and inflated prices is putting pressure on American consumers and has limited the ability of Democrats to run campaigns touting the strength of the employment market as they attempt to maintain control of Congress.
Before Tuesday’s midterm elections, Republican candidates pounded Democrats on the damaging effects of inflation.
The Fed issued its statement on Wednesday following its most recent policy meeting. Many analysts anticipate that Chair Jerome Powell would hint at a press conference that the Federal Reserve’s anticipated next rate hike in December might be a half-point increase rather than a three-quarter one.