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Latest rate hike means more bad news for consumers

Latest rate hike means more bad news for consumers


Latest rate hike means more bad news for consumers

WASHINGTON — Intensifying its fight against high inflation, the Federal Reserve raised its key interest rate Wednesday by a substantial three-quarters of a point for a third straight time and signaled more large rate hikes to come — an aggressive pace that will heighten the risk of an eventual recession.

The Fed’s move boosted its benchmark short-term rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level since early 2008.

The officials also forecast that they will further raise their benchmark rate to roughly 4.4% by year's end, a full percentage point higher than they had forecast as recently as June. And they expect to raise the rate further next year, to about 4.6%. That would be the highest level since 2007.

On Wall Street, stock prices fell and bond yields rose in response to the Fed’s projection of further steep rate hikes ahead.

The central bank's action Wednesday followed a government report last week that showed high costs spreading more broadly through the economy, with price spikes for rents and other services worsening even though some previous drivers of inflation, such as gas prices, have eased. By raising borrowing rates, the Fed makes it costlier to take out a mortgage or an auto or business loan. Consumers and businesses then presumably borrow and spend less, cooling the economy and slowing inflation.

Many economists blame President Biden and his Democrat colleagues for pouring trillions of dollars into the economy through various programs passed since he took office.

Speaking at a news conference, Chair Jerome Powell said that before Fed officials would consider halting their rate hikes, they would “want to be very confident that inflation is moving back down” to their 2% inflation target.