The Federal Reserve jacked up interest rates three-quarters of a percentage point again Wednesday, its fourth straight jump of that amount. There were indications afterwards, however, that future increases may be in smaller increments.
The unprecedented surge in rates is a desperate attempt to rein in skyrocketing inflation, and there are certain to be more coming. The next jump in December, however, may not match the previous four if there is progress in slowing the U.S. economy.
Fed Chair Jerome Powell emphasized after the policy meeting that there is still much room for interest to go higher.
Saying he wanted no confusion, he declared that even if the central bank pulls back future increases, there is no predetermined level for how high rates may go. He added the Fed’s belief that the pace of increases is not nearly as important as their peak.
Powell further called it “very premature” to speculate on when the rate hikes may be paused.
Instead, he insisted, policymakers are set on “staying the course until the job’s done.”
BREAKING: The Federal Reserve raised interest rates another three-quarters of a percentage point, the sixth rate hike this year. https://t.co/GEdfvQ1b0r
— CBS News (@CBSNews) November 2, 2022
Many analysts took Wednesday’s Fed policy statement to indicate that more increases are on the way before this tightening cycle is finished. They may, however, come at a slower pace.
And while investors hoped for a clear signal that the frenetic pace of increases would ease, they were forced to settle for hints of a slowdown to come.
At present, monetary policy is tightening at a speed unseen since the early 1980s. How fast it continues will be determined, the Federal Open Market Committee said in a statement, by several factors.
Included will be the “cumulative tightening of monetary policy” taking into account the “lags with which monetary policy affects economic activity and inflation,” and changes in the economy and the financial sector.
Some analysts, such as Advisors Capital Management Partner JoAnne Feeney, did not see a “surprise” in the Fed’s policy statement. “Growth is moderating,” she said, and that could indicate that “the end might be in sight for rate increases.”