Fed ushers In fourth jumbo rate increase to fight inflation

Federal Reserve officials continued their assault on rapid inflation Wednesday, raising interest rates by three-quarters of a point in their sixth policy move this year and suggesting there was more to come.

But, in a move that could signal an eventual slowdown, policymakers also said they were aware of how much they have already acted to cool the economy.

The Fed, in its policy statement, said officials were cognizant interest rate moves take time to work – outlining a possible rationale for slowing rate increases soon.

Officials have raised borrowing costs from near-zero in March to a range of 3.75% to 4%, and their three-quarter point rate increase Wednesday was the fourth straight move of that size.

The Fed’s campaign to cool the economy has been its fastest since the 1980s, and central bankers have been suggesting for months they wanted to dial back the pace.

Their September economic projections suggested that they might slow down as soon as their December meeting.

But inflation has remained stubbornly high since then, and many economists have wondered when and how the Fed would be able to manage such a pullback. Central bankers do not want markets to interpret any slowdown as a sign that their resolve to wrestle price increases back under control has cracked.

The Fed seemed to be attempting to thread the needle with its new statement: It acknowledged more rate moves were coming, but it also signaled it was cognizant of how its tightening is adding up.

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” the Fed statement said.

It added: “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

By including that line in its policy statement, the Fed signaled to economists and investors it would not blindly continue to make large interest rate increases, and officials could be setting the stage for a slowdown in rate moves.

Central bank officials stopped short of committing to an imminent pullback, maintaining room to maneuver at a time when the economy remains hot and uncertainty is rampant.

Addressing reporters Wednesday, Federal Reserve Chair Jerome Powell said “incoming data since our last meeting suggests that ultimate level of interest rates will be higher than previously expected.”

Powell said is it would be appropriate to slow the pace of increases “as soon as the next meeting or the one after that. No decision has been made,” he said, while stressing “we still have some ways” before rates were tight enough.

“It is very premature to be thinking about pausing,” he said.