Fed goes big with rate hike, sees another large increase in 2022

Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. courtesy : REUTERS/Leah Millis/File Photo

The Federal Reserve made history on Wednesday, approving a third consecutive 75-basis-point hike in an aggressive move to tackle the inflation that has been plaguing the US economy.

The central bank has raised its benchmark rate five times this year — from near zero to 3.125%. On average, Fed policymakers think rates will climb to about 4.4% by the end of this year and 4.6% by the end of next year.

Federal Reserve Chairman Jerome Powell has acknowledged the economic pain due to rapid tightening regime.

“We must keep at it until the job is done,” he said at an August central bankers’ forum in Jackson Hole, Wyoming. “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” he warned.

Fed Chair Jerome Powell will hold a news conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the latest two-day policy meeting.