Jerome Powell’s remarks followed the government’s blockbuster report last week that employers added 517,000 jobs in January, nearly double December’s gain. The unemployment rate fell to its lowest level in 53 years, 3.4%.
The Fed’s latest move, though smaller than its previous hike—and even larger rate increases before that—will likely further raise the costs of many consumer and business loans and the risk of a recession.
With signs of weaker economic growth along with steadily lower inflation readings, reduced consumer spending and even some signs of a slowdown in the job market, the Federal Reserve is now navigating a more treacherous terrain.
Overall, the minutes showed that Federal Reserve officials remained determined to keep rates high to quell inflation and have taken little comfort from inflation’s decline from a peak of 9.1% in June to 7.1% in November.
Megadeals announced early in the year were soon replaced by jitters about getting mergers and acquisitions over the finish line, with monthly deal activity plummeting by almost half from May to June. The volumes have yet to recover.
Consistent with a sharp slowdown, Fed officials projected that the economy will barely grow next year, expanding just 0.5%, less than half the forecast it had made in September.
The six rate hikes the Fed has already imposed this year have raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years.
The report, the last of 2022, points to inflation that—while much too high—is beginning to ease.
In a recent speech, Federal Reserve Chair Jerome Powell pointed to the shortfall of workers and the resulting rise in average pay as the primary remaining driver of the price spikes that continue to grip the economy.
The latest year-over-year figure was down from 8% in October and from a recent peak of 11.7% in March.
The report also showed that consumers spent more in October, even after adjusting for inflation, a sign of their continued willingness to keep spending in the face of high prices.
The Federal Reserve will push rates higher than previously expected and keep them there for an extended period, Chair Jerome Powell said Wednesday, in remarks likely intended to underscore the Fed’s single-minded focus on combating stubborn inflation.
Chair Jerome H. Powell is expected to this week cement expectations that the Federal Reserve will slow its pace of interest-rate increases next month, while reminding Americans that its fight against inflation will run into 2023.
Comments by James Bullard raised the prospect that the Federal Reserve’s interest rate hikes will make borrowing by consumers and businesses even costlier and further heighten the risk of recession.
Economists largely stuck to their forecasts that the Federal Reserve will raise interest rates to 5% by March and hold them there for most of 2023, even after inflation slowed last month by more than forecast.
Speaking at an IBJ economic forecast event Monday, a Fifth Third Bank economist said the chance of heading into another recession is “literally a toss-up, a coin flip.”
The Federal Reserve on Wednesday raised its key short-term interest rate to a range of 3.75% to 4%, its highest level in 15 years.
Looming over the Federal Reserve meeting that ends Wednesday is a question of intense interest: Just how high will the Fed’s inflation-fighters raise interest rates—and might they slow their rate hikes as soon as next month?
Rising interest rates, inflation and recession risks have eroded consumer confidence and left buyout firms facing a new reality of higher financing costs and potentially lower returns.
The cold months pretty much always herald a drop in residential real estate sales. It just isn’t a great time to schlep around looking at houses. This season, however, is expected to bring a lower dip than in recent years.
