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Fed raises interest rates, pledges more hikes amid rampant inflation; warns of recession

mercredi 21 septembre 2022, 22:00 , par Mac Daily News
The Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level as it attempts to tamp down rampant U.S. inflation, which running near its highest levels in forty years. Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. Fed Chairman Jerome Powell warned the policies may lead to the official declaration of recession.

Jeff Cox for CNBC:

The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. That implies a quarter-point rate hike next year but no decreases… Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing.
Federal Open Market Committee members indicate they expect the rate hikes to have consequences… In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%. Increases of that magnitude often are accompanied by recessions.
Along with that, they see GDP growth slowing to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%. The revised forecast is a sharp cut from the 1.7% estimate in June and comes following two consecutive quarters of negative growth, a commonly accepted definition of recession.
Powell conceded that a recession is possible, particularly if the Fed has to keep tightening aggressively. “No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said.

MacDailyNews Take: As we wrote last week when the latest U.S. inflation data sent the Dow plummeting 1,200 points: After drifting around aimlessly for far too long on the U.S.S. Transitory, the delusional Fed is laughably too little, too late.
Catching up will be difficult. But, hey, good luck on that soft landing.
https://macdailynews.com/2022/09/21/fed-raises-interest-rates-pledges-more-hikes-amid-rampant-inflat...
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