The Federal Reserve Federal Open Market Committee (FOMC) announced an additional 75 basis-point increase to the federal funds rate following its September meeting. The increase brings the federal fund rate to 3-3.25 percent, the highest since 2008, following the third consecutive 75 basis-point increase this year.
Fed Chair Jerome Powell has maintained that the FOMC will continue to work to lower interest rates to 2 percent, which most economists consider to be “normal” annual inflation. Some experts are projecting the Fed to raise rates by at least 1.25 percentage points in the two remaining FOMC meetings this year.
“My main message has not changed since Jackson Hole,” Powell said in his post-meeting news conference, referring to his policy speech at the Fed’s annual symposium in August in Wyoming. “The FOMC is strongly resolved to bring inflation down to 2 percent, and we will keep at it until the job is done.”
The rate increases which started in March when rates were near zero percent, has been the most aggressive increase since it started using the overnight funds rate as its principal policy tool in 1990.
Fed officials have already begun signaling the intention of continuing to hike rates until the funds level hits a “terminal rate” of 4.6 percent in 2023. Members of the FOMC have indicated that there is not likely to be a decrease in the federal fund rate until 2024.
Powell conceded a recession is possible, particularly if the Fed must keep tightening aggressively.
“No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said.