Fed: Battle far from over
To make borrowing more expensive, the Fed has raised interest rates seven times including four bumper 0.75-point increases
Text size
Share
Daily TribuneTo make borrowing more expensive, the Fed has raised interest rates seven times including four bumper 0.75-point increases
Share
Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open Market Committee meeting on 14 December 2022 in Washington, DC. The Federal Reserve raised interest rates by 0.5 percentage point to 4.5. | Alex Wong/Getty Images/Agence France-Presse
The Federal Reserve in moderating its all-out campaign to cool US inflation warned there is still "some ways to go."
America's central bank has taken aggressive moves to ease demand in the world's biggest economy, hiking rates seven times this year with interest-sensitive sectors like housing already reeling from tightening policy.
Its latest increase takes the rate to 4.25-4.50 percent, the highest since 2007.
But officials signaled that their battle to cool the US economy is not yet over.
In a statement, the Fed's policy-setting Federal Open Market Committee said it "anticipates that ongoing increases in the target range will be appropriate" to reach a stance restrictive enough to rein in inflation.
A quarterly forecast released with Wednesday's decision also saw policymakers downgrade US economic growth to 0.5 percent in 2023, just narrowly avoiding a contraction.
They also raised their unemployment and inflation estimates for next year.
Squeezed by red-hot prices
"Fifty basis points is still a historically large increase, and we still have some ways to go," Fed Chair Jerome Powell told reporters in a press briefing after the rate announcement, and markets slumped on the central bank's signals.
In their projections, policymakers expect rates would land higher than expected at 5.1 percent next year, according to a median forecast.
"I wouldn't see us considering rate cuts until the committee is confident that inflation is moving down to two percent in a sustained way," Powell said.
While consumer inflation eased in October and November, Powell said "it will take substantially more evidence to give confidence that inflation is on a sustained downward path."
Households have been squeezed by red-hot prices, with conditions worsened by surging food and energy costs after Russia's invasion of Ukraine, and fallout from China's zero-Covid measures.
To make borrowing more expensive, the Fed has raised interest rates seven times including four bumper 0.75-point increases.
Asked if a "soft landing" for the economy remains achievable, Powell said this would be more likely if lower inflation readings persist.
Nancy Vanden Houten of Oxford Economics said: "The projections don't explicitly call for a recession, although a rise in the unemployment rate by as much as the Fed now forecasts is consistent with a recession."
The Fed lifted its median jobless rate forecast to 4.6 percent on Wednesday.
