After raising rates for the fifth time this year, the Federal Reserve Board anticipates more hikes to come.
Six months ago, the borrowing rate was at nearly zero percent. But with this week’s three-quarters-of-a-percentage-point increase, the rate is now at about 3.25%, the highest it’s been since the financial crisis of 2008.
Experts expect the rates to extend beyond 4% by the end of the year as the Fed tries to increase employment and reduce inflation.
Chair Jerome Powell admitted this week that the Fed’s goal to curb inflation without causing a recession might not be possible.
“The chances of a soft landing are likely to diminish,” Powell said. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be.”
But don’t think they will halt the rate increases anytime soon. Powell indicated that the rates would continue to increase until he sees clear evidence of inflation going back down to their 2% target.
“I wish there was a painless way to do that,” Powell said. “There isn’t.”
Not everyone thinks the rate increases are a good idea. After Wednesday’s hike, Janelle Jones, a former chief economist at the Labor Department, said, “Today, the Fed decided to risk mass joblessness in its fight against inflation. Raising interest rates, and pushing the economy toward a recession, will result in millions of workers being unemployed or taking pay cuts.”
Still, the Federal Reserve Board pointed out that “job gains have been robust in recent months,” and the unemployment rate remains low.
Factors that could lead to the Fed changing course and halting rate increases include a change in labor market conditions, public health, inflation expectations, international developments, and other financial developments. For now, though, it seems like the rates will continue to rise.