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The Fed’s key short-term rate is now to a range of 3.75% to 4% — its highest level in 15 years. Drew Angerer/Getty Images

Fed unleashes three-quarter point rate hike but hints at a pullback

Associated Press Nov 2, 2022
The Fed’s key short-term rate is now to a range of 3.75% to 4% — its highest level in 15 years. Drew Angerer/Getty Images

The Federal Reserve pumped up its benchmark interest rate Wednesday by three-quarters of a point for a fourth straight time but hinted that it could soon reduce the size of its rate hikes.

The Fed’s move raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years. It was the central bank’s sixth rate hike this year — a streak that has made mortgages and other consumer and business loans increasingly expensive and heightened the risk of a recession.

The persistence of inflated prices and higher borrowing costs has undercut the ability of Democrats to campaign on the robust health of the job market as they try to maintain control of Congress. Republican candidates have hammered Democrats on the punishing impact of inflation in the run-up to the midterm elections that will end Tuesday.

The Fed’s statement Wednesday was released after its latest policy meeting. Many economists expect Chair Jerome Powell to signal at a news conference that the Fed’s next expected rate hike in December may be only a half-point rather than three-quarters.

Typically, the Fed raises rates in quarter-point increments. But after having miscalculated in downplaying inflation last year as likely transitory, Powell has led the Fed to raise rates aggressively to try to slow borrowing and spending and ease price pressures.

Wednesday’s latest rate increase coincided with growing concerns that the Fed may tighten credit so much as to derail the economy. The government has reported that the economy grew last quarter, and employers are still hiring at a solid pace. But the housing market has cratered, and consumers are barely increasing their spending.

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