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The Federal Reserve raised the target federal funds rate by 0.75% on Wednesday, but indicated that officials will avoid an overly zealous contractionary policy even as economists warn of a lagged effect that could reach into next year.
The fourth consecutive 0.75% increase occurs as inflation remains elevated at four-decade highs. Target interest rates are now set between 3.75% and 4%.
“In the face of stubbornly high inflation, the Federal Reserve raised interest rates aggressively once again,” Bankrate Chief Financial Analyst Greg McBride remarked in a statement provided to The Daily Wire. “Unfortunately, we’re likely to feel the pain of a slower economy before we see the gain of lower inflation.”
The stock market reacted positively in the immediate aftermath of the rate hike announcement since a statement from the Federal Reserve Board of Governors affirmed that officials “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.” The new language had not been included in previous announcements.
McBride affirmed that the central bank does not intend to pause or reverse their contractionary monetary policy.
