The Federal Reserve announced its fourth consecutive interest rate increase on Wednesday as it seeks to combat inflation in the US economy.
The central bank said in a statement that job gains, Russia’s assault on Ukraine and related economic activity have increased inflationary pressures across the globe.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 per cent over the longer run,” it said in a statement.
As a result, the Federal Reserve said in a statement that it would raise the interest rate to 3.75 to 4 per cent, also known as 75 basis points.
“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 per cent over time,” it said. “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Chairman Jerome Powell said in a press conference that eventually, it will become approproate to slow the rate of interest increases, which could affect the labour market once inflation is under control.
“There is significant uncertainty around that level of interest rates,” he said. “Even so, we still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”
Mr Powell said that the Federal Reserve was also taking forceful actions to slow down demand so that it aligns better with supply. The Federal Reserve attempts to keep inflation at a target rate of 2 per cent.
“Reducing inflation is likely to require a sustained period of below-trend growth and some softening of labor market conditions,” he said. “Restoring price stability is essential to set the stage for achieving maximum employment and stable prices in the longer run.”
The move comes as concerns about inflation continue. Last month, the Consumer Price Index report found that that inflation increased by 0.4 per cent in the month of September and that inflation increased 8.2 per cent in the past 12 months.
Many Americans continue to express concern about high gasoline prices, though it has dropped in some regions, as well as high prices at the grocery store and in other sectors.
Mr Powell said that eventually, that rate hikes might slow down as soon as the next meeting or the one after that.
“We note that in determining the pace of future increases, we’ll take the cumulative tightening of monetary policy as well as the lags with which monetary policy affects economic activity and inflation,” he said. “That time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made. It is likely we’ll have a discussion about this at the next meeting.”
