The Federal Reserve on Wednesday is expected to announce an increase of up to three-quarters of a percentage point in its benchmark interest rate, triple its usual margin.
The Federal Reserve on Wednesday raised its benchmark interest rate by a hefty three-quarters of a point for a second straight time in its most aggressive drive in three decades to tame high inflation.
The Fed is tightening credit even while the economy has begun to slow, thereby heightening the risk that its rate hikes will cause a recession later this year or next. The surge in inflation and fear of a recession have eroded consumer confidence and stirred public anxiety about the economy, which is sending frustratingly mixed signals.
At the same time, consumers are showing signs of cutting spending in the face of high prices. And business surveys suggest that sales are slowing. But economists say that wouldn't necessarily mean a recession had started. During those same six months when the overall economy might have contracted, employers added 2.7 million jobs - more than in most entire years before the pandemic. Wages are also rising at a healthy pace, with many employers still struggling to attract and retain enough workers.
"How much recession risk are you willing to bear to get back to 2%, quickly, versus over the course of several years?" asked Nathan Sheets, a former Fed economist who is global chief economist at Citi. "Those are the kinds of issues they're going to have to wrestle with."
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