Fed Hikes Rates, Sharply Lowers Economic Forecast.
U.S. News & World Report
In a widely expected move, the Federal Reserve raised interest rates by three-quarters of a point on Wednesday, as it tries to strangle inflation by tamping down economic demand.
The central bank also sharply downgraded its economic forecast, with its median expectation of growth in gross domestic product now at 0.2% for the year, down from 1.7% in June. Unemployment will reach 3.8% this year, up from 3.7% earlier, and 4.4% for each of the next two years. The Fed also raised inflation expectations to 5.4% this year from 5.2% in June, while also lifting its inflation forecast for 2023 to 2.8% from 2.6% and for 2024 to 2.3% from 2.2%.
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The Fed’s forecast also sees it raising rates to a peak of 4.6% in 2023, up from 3.8% in its June summary of economic conditions.
Fed Chairman Jerome Powell spoke after the announcement and while noting a slowdown in economic activity, particularly in housing and business investment, he said the labor remained “out of balance” with demand for workers outstripping supply.
“We are taking forceful and rapid steps to moderate demand,” Powell said. “We will keep at the job until we are done.”
Powell suggested the idea of a “soft landing” where inflation comes back down to the preferred goal of a 2% average is “diminishing” the longer the Fed keeps tightening, but he added that no one knows if or when a recession will occur, or how severe it might be.
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In a widely expected move, the Federal Reserve raised interest rates by three-quarters of a point on Wednesday, as it tries to strangle inflation by tamping down economic demand.
The central bank also sharply downgraded its economic forecast, with its median expectation of growth in gross domestic product now at 0.2% for the year, down from 1.7% in June. Unemployment will reach 3.8% this year, up from 3.7% earlier, and 4.4% for each of the next two years. The Fed also raised inflation expectations to 5.4% this year from 5.2% in June, while also lifting its inflation forecast for 2023 to 2.8% from 2.6% and for 2024 to 2.3% from 2.2%.
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soona.co
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The Fed’s forecast also sees it raising rates to a peak of 4.6% in 2023, up from 3.8% in its June summary of economic conditions.
Fed Chairman Jerome Powell spoke after the announcement and while noting a slowdown in economic activity, particularly in housing and business investment, he said the labor remained “out of balance” with demand for workers outstripping supply.
“We are taking forceful and rapid steps to moderate demand,” Powell said. “We will keep at the job until we are done.”
Powell suggested the idea of a “soft landing” where inflation comes back down to the preferred goal of a 2% average is “diminishing” the longer the Fed keeps tightening, but he added that no one knows if or when a recession will occur, or how severe it might be.
Continue reading
