The increase that the government reported Tuesday will be a disappointment for Federal Reserve officials, who are seeking to cool hiring by raising short-term interest rates to try to slow borrowing and spending, which tend to fuel inflation.
In development for effectively a decade, FedNow is expected to allow banks of any size to send payments to each other in real-time. That will allow bank customers to send real-time payments to one another on the same rails.
The losses came after Chair Jerome Powell said the Federal Reserve will likely need to keep interest rates high enough to slow the economy for some time in order to beat back the high inflation sweeping the country.
Federal Reserve leader Jerome Powell acknowledged the rate hikes will hurt the job market and U.S. households, but he also said the pain would be worse if inflation were allowed to fester.
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.
When it ends its latest policy meeting Wednesday afternoon, the Fed is expected to impose a second consecutive three-quarter-point hike in its benchmark interest rate, raising it to a range of 2.25% to 2.5%.
Such an increase would mark a further ramping up of the Fed’s rate hikes as it intensifies its fight against accelerating inflation. The Fed hasn’t raised its rate by 1 percentage point in several decades.
Investors upped bets the central bank could make a one percentage-point rate hike at its July 26-27 meeting—which would be the largest increase of the modern Federal Reserve era.
St. Louis Federal Reserve President James Bullard said he currently supports a 0.75 percentage point increase in the Fed’s benchmark short-term interest rate at its next meeting later this month.
Federal Reserve officials are concerned that Americans are starting to expect high inflation to last longer than they had before—a sentiment that could embed an inflationary psychology and make it harder to slow price increases.
Thursday’s report from the Commerce Department provided the latest evidence that painfully high inflation is pressuring American households and inflicting particular harm on low-income families and people of color.
Federal Reserve Chair Jerome Powell repeated his hope that the Fed can achieve a so-called soft landing, but said the job had become more difficult.
Federal Reserve Chair Jerome Powell on Wednesday underscored the Fed’s determination to raise interest rates high enough to slow inflation, a commitment that has fanned concerns that the central bank’s fight against surging prices could tip the economy into recession.
Financial markets shuddered Thursday as they adjusted to the Federal Reserve’s latest attempts to address inflation.
The Federal Reserve on Wednesday intensified its drive to tame high inflation by raising its key interest rate and signaling more large rate increases to come that could raise the risk of another recession.
A series of sizable increases would heighten borrowing costs for consumers and businesses, likely leading to an economic slowdown and raising the risk of a recession.
The prospect that the Fed will accelerate its credit tightening, further raising borrowing costs for households and businesses, drove the stock market sharply lower Monday. The broad S&P 500 index fell into bear-market territory.
The job growth in May was high enough to keep the Federal Reserve on track to pursue what’s likely to be the fastest series of rate hikes in more than 30 years.
The White House launched a push Tuesday to contain the political damage caused by inflation after President Joe Biden complained for weeks to aides that his administration was not doing enough to publicly explain the fastest price increases in roughly four decades.
Prices for just about everything Americans buy have spiked in the past two years. Inflation, which had been scarcely noticeable for decades, is suddenly the top concern most people have about the economy. And it all seemed to catch Washington, D.C., by surprise.
