Source:USA Today —
WASHINGTON – The Federal Reserve is going slower but aiming higher.
The Fed agreed to raise its key short-term interest rate by half a percentage point Wednesday, dialing back from recent outsize hikes as it draws up an end game in its aggressive campaign to tame soaring inflation.
But the central back forecast another three-quarter point in rate increases next year, more than it previously estimated. Fed officials are thus signaling they believe inflation is still too high and aren’t backing off their hard-nosed battle to subdue it despite growing recession risks.
In a statement after a two-day meeting, the Fed reiterated that “ongoing (rate) increases…will be appropriate” to bring down yearly inflation to the Fed’s 2% goal. Some economists reckoned the Fed instead would say “additional increases” would be needed, signaling the Fed is close to winding down the hiking cycle.
Fed Chair Jerome Powell is expected to provide more clues about the Fed’s plans at a 2:30 p.m. news conference.
What was the Fed interest rate decision today?
The Fed’s latest move follows four straight three-quarter point increases and takes the federal funds rate – which is what banks charge each other for overnight loans — to a range of 4.25% to 4.5%, a restrictive level intended to slow economic growth.
The hike is expected to ripple through the economy, driving up rates for credit cards, home equity lines of credit, adjustable rate mortgages and other loans. But Americans, especially seniors, are finally benefitting from higher bank savings yields after years of paltry returns.
Since the benchmark rate hovered near zero in March, the Fed has hoisted it by more than 4 points, the fastest pace since the early 1980s.
How high will Fed interest rates go?
The Fed now expects the rate to end 2023 at a range of 5% to 5.25%, higher than the 4.5% to 4.75% it projected in September, according to policymakers’ median forecast. It estimates it will cut the rate to 4.1% by the end of 2024 to support an economy likely to be weakened by the rate increases, above the 3.9% it predicted in September.