The central bank is expected to raise its key short-term rate by a substantial three-quarters of a point for the third consecutive time.
FILE - A for sale sign is posted in front of a home in Sacramento, Calif., Thursday, March 3, 2022. The Federal reserve is expected at its meeting this week to raise its key interest rate by a substantial three-quarters of a point for the third consecutive time. Another hike that large would lift its benchmark rate which affects many consumer and business loans to a range of 3% to 3.25%, the highest level in 14 years.
Fed officials have said they’re seeking a “soft landing,” by which they would manage to slow growth enough to tame inflation but not so much as to trigger a recession. Yet economists increasingly say they think the Fed’s steep rate hikes will lead, over time, to job cuts, rising unemployment and a full-blown recession late this year or early next year.
And even with the steep rate hikes the Fed foresees, it still expects core inflation — which excludes the volatile food and gas categories — to be 3.1% at the end of next year, well above its 2% target.to households and businesses. And he added that the central bank’s commitment to bringing inflation back down to its 2% target was “unconditional.”
Inflation now appears increasingly fueled by higher wages and by consumers’ steady desire to spend and less by the supply shortages that had bedeviled the economy during the pandemic recession. On Sunday, though, Biden said on CBS’ “60 Minutes” that he believed a soft landing for the economy was still possible, suggesting that his administration’s recent energy and health care legislation would lower prices for pharmaceuticals and health care.
Konczal said there is a case to be made for the Fed to slow its rate hikes over the next two meetings.The Fed’s rapid rate hikes mirror steps that other major central banks are taking, contributing to concerns about a potential global recession. The European Central Bank last week raised its benchmark rate by three-quarters of a percentage point. The Bank of England, the Reserve Bank of Australia and the Bank of Canada have all carried out hefty rate increases in recent weeks.
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