Fed’s Bostic says no need to move faster than half-point hikes
Fed officials raised interest rates by a half-point last week and Chairman Jerome Powell signaled they would continue at that pace at meetings in June and July to curb inflation.
Fed officials raised interest rates by a half-point last week and Chairman Jerome Powell signaled they would continue at that pace at meetings in June and July to curb inflation.
Economists and investors foresee the fastest pace of Federal Reserve rate increases since 1989. The result could be much higher borrowing costs for households well into the future.
The Federal Reserve intensified its fight against the worst inflation in 40 years by raising its benchmark short-term interest rate by a half-percentage point Wednesday—its most aggressive move since 2000—and signaling further large rate hikes to come.
The relatively close vote reflects the increasingly partisan atmosphere in Congress that is now engulfing the nomination process for the Fed, an independent institution that has sought to remain above politics.
As the Federal Reserve sees it, the surge in job postings forces employers to boost wages to attract and keep workers. Those higher labor costs are then passed to customers in the form of higher prices, thereby helping fuel inflation.
The Fed last month kicked off what’s expected to be a series of interest rate hikes to tame inflation, but the efforts to temper demand will take time to materialize.
In minutes from their policy meeting three weeks ago released Wednesday, Fed officials said that half-point interest rate hikes, rather than traditional quarter-point increase, “could be appropriate” multiple times this year.
Federal Reserve Chair Jerome Powell said new forms of digital money such as cryptocurrencies and stablecoins present risks to the U.S. financial system and will need new rules to protect consumers.
Federal Reserve Chairman Jerome Powell said that if necessary, the central bank would be open to raising rates by a comparatively aggressive half-point at multiple Fed meetings. The Fed hasn’t raised its benchmark rate by a half-point since May 2000.
The Senate Banking Committee approved Jerome Powell’s nomination to a second four-year term as chair of the Federal Reserve Wednesday, just hours after the central bank began what will be a difficult effort to combat inflation.
The Federal Reserve’s quarter-point hike in its key rate, which it had pinned near zero since the pandemic recession struck two years ago, marks the start of its effort to curb the high inflation that has followed the recovery from the recession.
The Federal Reserve on Wednesday will launch one of the most difficult tasks a central bank can attempt: Raise borrowing costs enough to slow growth and tame high inflation, but not so much as to topple the economy into recession.
Investors have ramped up expectations for an aggressive Fed posture in the face of the highest inflation in four decades. But the economists say the outlook has become muted by uncertainty over Ukraine, sanctions and surging commodities prices.
Chairman Jerome Powell said Wednesday that he supports a traditional quarter-point increase in the Federal Reserve’s benchmark short-term interest rate when the Fed meets later this month, rather than a larger increase that some of its policymakers have proposed.
The debate over how quickly to raise interest rates is being closely watched by financial markets and also could have an impact on the broader economy.
Federal Reserve Governor Michelle Bowman said Monday that she was open to lifting interest rates by more than the traditional quarter-point at the central bank’s next meeting in March.
Fed officials are expected to raise their benchmark short-term rate several times this year beginning in March. But economists have increasingly suggested that the Fed has waited too long to unleash its inflation-fighting tools.
A worsening inflation picture has touched off a range of opinions from the Federal Reserve’s policymakers about just how fast they should raise interest rates.
With high inflation squeezing consumers and businesses and unemployment falling steadily, the Fed also said it would phase out its monthly bond purchases, which have been intended to lower longer-term rates, in March.
The Federal Reserve said its 12 regional banks found that the economy was continuing to grow, but many regions reported a sudden pullback in spending on leisure travel, hotels and restaurants because of the rapid spread of the omicron variant of the coronavirus.