The Federal Reserve (the Fed) took its most aggressive step yet to try to tame rapid inflation, raising interest rates by three-quarters of a percentage point and signaling that it is prepared to inflict economic pain to get prices under control.
Production and shipping backlogs tied to the Covid-19 pandemic have shown early signs of easing but remain pronounced, keeping products like cars and trucks (though fleets of all sizes in need of commercial assets should check out TruckTractorTrailer.com) in short supply. On top of that, the war in Ukraine is elevating food and fuel prices, and its trajectory is unpredictable. Thus, The Fed admits that it is becoming increasingly difficult for them to slow inflation without causing a recession due to these outside forces
The rate increase was the central bank’s biggest since 1994 and could be followed by a similarly sized move next month, suggested Jerome H. Powell, the Fed chair.
Officials also significantly cut their outlook for 2022 economic growth, now anticipating just a 1.7 percent gain in GDP, down from 2.8 percent from March.
The inflation projection as gauged by personal consumption expenditures also rose to 5.2 percent this year from 4.3 percent, though core inflation, which excludes rapidly rising food and energy costs, is indicated at 4.3 percent, up just 0.2 percentage point from the previous projection.
The economy remains strong for now, but the Fed’s actions are beginning to have a serious impact: Mortgage rates have risen sharply and are helping to cool the housing market; demand for consumer goods is showing signs of beginning to slow as borrowing becomes more expensive.
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