The Fed: Fed to put a ‘firm foot on the brake pedal’ this week

by | Sep 19, 2022 | Stock Market

The Federal Reserve is widely expected this week to raise its benchmark interest rate by 0.75 percentage points in an effort to slow the economy as a way to cool inflation. “What the Fed was doing earlier this year was taking its foot off the gas pedal,” said Carl Riccadonna, chief U.S. economist at BNP Paribas. “This 75 [bp] move is a firm foot on that brake pedal.”

The ultra-large hike would bring the Fed’s policy rate to a range of 3% to 3.25% — a level that Fed officials believe will start to restrict economic growth. Markets are pricing in the small chance of a 100-basis-point move, but economists are skeptical. “We doubt there is consensus on the FOMC to go that much and accelerate the pace of tightening further,” said Sam Bullard, senior economist at Wells Fargo. The Fed will announce its decision on interest rates at 2 p.m. Eastern on Wednesday. The central bank will also release updated economic forecasts, and Fed Chairman Jerome Powell will hold a press conference starting at 2:30 p.m. Read: The Fed is ready to tell us how much ‘pain’ the economy will suffer Economists think Powell will talk tough on inflation as a result of last week’s surprisingly hot consumer inflation report for August. Core inflation surged 0.6% in August, dashing optimistic hopes that inflation was ebbing. “I believe that Powell has no choice but to repeat the firm tone conveyed at Jackso …

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