The Federal Reserve met in December to discuss the consequences of the central bank’s recent series of interest rate hikes. The interest rate was raised by half a percentage point at the meeting, bringing the current interest rate range to 4.25% to 4.5%.
The rate hike is an attempt to contain high inflation. The Fed raises them in order to raise the cost of borrowing for businesses and consumers. The goal is to reduce borrowing, cool an overheated economy, and prevent inflationary spikes. The trick is to moderate inflation without causing the economy to enter a recession, which economists refer to as a “soft landing.”
While Federal Reserve Chair Jerome Powell indicated in November that the central bank was likely to slow the pace of interest rate hikes in December – there have already been six this year – rates would be raised above the initially anticipated threshold.
In the coming year, the Federal Reserve will meet on this date in 2023.
Schedule of Federal Reserve Meetings in 2023
January 31-February 1 March 21-22 May 2-3 June 13-14 July 25-26 September 19-20 October 31-November 1 December 12-13
How much did the Federal Reserve raise interest rates?
Interest rates were raised by 0.50 percentage points at the Fed’s most recent meeting, held on December 13-14. The policy, which is slightly smaller in size than the previous three hikes, is intended to combat soaring inflation.
Is the Fed’s interest rate hikes lowering inflation?
According to some evidence, inflation may be on the decline.
Monthly job growth in the United States fell from 537,000 in July to 263,000 in September, while private-sector wages and salaries increased 5.2% year on year. These figures are historically high, but they are still lower than the 5.7% reported in the previous quarter.
The consumer price index is perhaps the most closely watched inflation indicator. Overall prices were up 7.1% from the previous year in November, but down from a four-decade high of 9.1% in June.
Economists also predict that, even if the Fed does not raise interest rates significantly, inflation will slow as supply-chain bottlenecks ease, commodity prices fall, a strong dollar lowers import costs, and retailers offer discounts to unload bloated inventories.
In 2022, how many times will the Fed raise interest rates?
This year, interest rates have been raised seven times. Rates had been near zero during the pandemic’s economic halt, but were raised by 0.25 percentage point beginning in March.
Another 0.50 percentage point increase occurred in May, followed by a 0.75 percentage point increase in June. Then another 0.75 arrived in July, followed by another of the same size in September.
The most recent increase, of 0.75 percentage points, occurred in November, bringing the rate back to its current range of 3.75% to 4.00%.