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Central Bank Raises Interest Rates by Another 0.75%

By:
S.J. Steinhardt
Published Date:
Nov 3, 2022

On Wednesday, the Federal Reserve Board raised interest rates by another 0.75 percentage point, as it continues to battle the fastest inflation in four decades. It was the fourth consecutive meeting, and the sixth time this year, that the Fed has done so.

The new rate, a range of 3.75 to 4 percent, is the highest since the Great Recession of 2007-09, Time reported. The announcement caused the S&P 500 index to drop by 2.5 percent, according to the New York Times.

Fed Chair Jerome Powell has consistently said that the central bank would do whatever it takes to tame inflation. “We anticipate that ongoing increases will be appropriate,” he said at a press conference. “It is very premature to think about pausing. … We have a ways to go” to return inflation to the Fed’s target rate of 2 percent.

In its statement announcing the rate increase, the Federal Open Market Committee said that “Russia's war against Ukraine is causing tremendous human and economic hardship … and related events are creating additional upward pressure on inflation and are weighing on global economic activity.” It also noted that “[r]ecent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low.”

A key indicator that the Fed watches closely, the U.S. Department of Commerce’s Personal Consumption Expenditures Price Index, showed an annual increase of 6.2 percent. The Employment Cost Index Summary, issued by the U.S. Bureau of Labor Statistics, reported increases in wages and benefits of 5.1 percent in the last year.

The Fed has estimated that borrowing costs could go up to 4.6 percent by the end of this year.

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