The Federal Reserve is expected to raise interest rates by another 0.75 percentage points today, as it tries to control runaway prices.
Overall consumer spending remains strong, however, so Fed policymakers will continue to tighten the screws. Analysts will be watching closely today for signals of how much higher interest rates are likely to go.
"The Fed will continue to hike rates until it actually restrains the economy and intends to keep rates at those restrictive levels until inflation is unmistakably on its way to 2%," McBride said.The prospect that interest rates will stay higher for longer has rattled investors in recent weeks. The Dow Jones Industrial Average fell more than 313 points on Tuesday, and other major stock indexes were also down about 1%.
In recent weeks, Fed officials have stressed their willingness to do whatever it takes to get inflation under control, even if that results in somewhat higher unemployment.businesses adding hundreds of thousands of jobs"If unemployment were to stay under, say 5%, I think we could really be really aggressive on inflation," Waller said."Once it gets over 5%, there's going to be obvious pressure to start making tradeoffs.
Fed chairman Jerome Powell insists the central bank will not be swayed by political pressure to take its foot off the brake prematurely. Powell argues that's, allowing inflation to become more firmly entrenched. "We will keep at it until the job is done," Powell told an audience at the CATO Institute this month."The longer inflation remains well above target, the greater the risk that the public does begin to see higher inflation as the norm, and that has the capacity to really raise the cost of getting inflation down.". People have grown more confident of that over the summer as the cost of gasoline — with its highly visible price tag — has fallen.
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