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The Federal Reserve has raised interest rates by 75 basis points for a third straight time, pushing rates to their highest level since early 2008 with signals that borrowing costs will continue to rise this year. Federal Reserve Chair Jerome Powell vowed that he and his fellow policymakers would "keep at" their battle to beat down inflation.
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Economic projections provided along with the announcement suggest Fed officials expect to raise rates to 4.4% by the end of the year, well above the 3.4% forecast in June.
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The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024. Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing. Powell was blunt about the "pain" to come, citing rising joblessness and singling out the housing market, a persistent source of rising consumer inflation, as being likely in need of a "correction".
Why it matters
The moves come amid stubbornly high inflation that Powell and his colleagues spent much of last year dismissing as “transitory". The Fed was late to recognize inflation, late to start raising interest rates, and late to start unwinding bond purchases. US stocks, already mired in a bear market over concerns about the Fed's monetary policy tightening, ended the day sharply lower, with the S&P 500 index skidding 1.8%.
