The Federal Reserve is looking to slow but not stop its aggressive approach to inflation. Here’s what it means for the economy.
The Federal Reserve is expected to raise interest rates by a 0.25 percentage point Wednesday to further fight inflation, bringing an end to a brief pause to rate hikes last month.
The change will bring borrowing costs to a 22-year high range of 5.25 percent to 5.5 percent, an increase that will be felt by businesses and consumers alike. Though inflation has come down significantly in recent months, it’s still above the Fed target rate of 2 percent. In June, the consumer price index, viewed as a proxy for inflation, was still 3 percent, despite being the lowest it’s been since March 2021.
Some analysts think that further interest rate hikes are unnecessary at this time, in part because the Fed’s previous 10 consecutive rate hikes over the last year may have a delayed effect on the economy, but are still largely optimistic that it won’t trigger a recession. Nevertheless, it seems that the Fed is looking to slow, but not stop, its aggressive approach to inflation.
“Given how far we have come, it may make sense for rates to move higher but at a more moderate pace,” Fed Chairman Jerome Powell noted in June.
