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Federal Reserve to raise rates again at 2 pm ET

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Wednesday’s Federal Reserve raises interest rates by 0.75% as a central bank Trying to avoid a serious recession..

The decision to move 0.75% June Fed final move, This was the largest single conference rate increase since 1994. Wednesday’s decision was unanimously agreed by voting members of the Federal Open Market Committee.

The Federal Reserve Board is currently attending four consecutive meetings to increase borrowing costs in the United States and is expanding its efforts to curb household and corporate spending. The goal is to disrupt inflation, which is running at a rate not seen since the early 1980s.

Short-term borrowing rates are currently between 2.25% and 2.50%, comparable to 2019 levels.

“Recent indicators of spending and production have softened.” The Federal Reserve said in its policy announcement..

“Nevertheless, employment growth has been strong in recent months and unemployment remains low, reflecting supply and demand imbalances associated with pandemics, rising food and energy prices, and broader price pressures. , Inflation continues to rise. “

The Federal Reserve Board again said, “We expect continuous expansion of the target range to be appropriate.”

Inflation measurements in summer have not yet shown a relief from inflationary pressures. In June US prices rose 9.1% Year-over-year — fastest pace since November 1981.

Tightrope walking

The Federal Reserve says one of the factors behind high inflation remains the war in Ukraine, where economic sanctions have led to higher global energy prices. However, Fed officials acknowledge that the sharp rise in domestic prices is also the result of demand stimulated by low interest rate policies during the pandemic era.

These inflationary factors make it difficult for the Fed to reach its immediate goal of lowering inflation without causing high unemployment. A June reading in the labor market showed The unemployment rate is relatively low at 3.6%, which is close to the lowest level before the pandemic.

As the Fed raises borrowing costs, there is growing concern that a recession in economic activity may force companies into layoffs. The FOMC continued to describe the increase in employment as “strong” while inflation remained “rising.”

The rise in interest rates on Wednesday will also take place the day before the release of government data on economic growth in the second quarter of this year.Following a quarter of Negative growth in the first quarterTwo consecutive negative readings could further establish concerns that the US economy is already in recession.

However, uncertainty about the speed and scale of rate hikes has led to speculation about how much the Fed can raise rates before the Fed returns to a rate cut due to worsening economic activity.

Central bank itself Forecast from June To stop the slowdown in inflation, the Fed estimates that interest rates will need to be raised to around 3.8% next year, but these forecasts may now be out of date.

The Fed’s efforts to undo the stimulus of the pandemic era also include rewinding some of the assets purchased in 2020 and 2021. The Fed on Wednesday did not make any changes to its previously announced rewind plan. Its assets will roll off from September to approximately $ 95 billion per month.

As of the beginning of the year, the Fed’s total wealth holdings totaled about $ 9 trillion.

The Federal Reserve Board will release updated economic forecasts with the next policy announcement scheduled for September 21st.

Federal Reserve Chairman Jerome Powell speaks to reporters in Washington State on June 15, 2022.Reuters / Elizabeth Franz

Brian Cheung is Yahoo Finance’s Fed, Economics and Banking reporter. You can follow him on Twitter @bcheungz..

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