US Fed attacks inflation with another big hike and expects more
The US Federal Reserve rolled out another steep increase in the key US interest rate and said more hikes are coming as part of the battle to rein in soaring prices – an aggressive stance that has raised fears of a recession.
It was the third consecutive increase of 0.75 percentage points by the Fed’s policy-setting Federal Open Market Committee (FOMC), continuing the forceful action that has included five hikes this year. Earlier on Wednesday, the National Association of Realtors reported that the US existing home sales dropped for a seventh straight month in August.
Federal Reserve Chair Jerome Powell warned that the process of conquering the highest inflation in 40 years will involve some pain. 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.”
The United States has had a “red hot housing market … There was a big imbalance,” Powell said in a news conference after Fed policymakers unanimously agreed to raise the central bank’s benchmark overnight interest rate to a range of 3.00%-3.25%. “What we need is supply and demand to get better aligned … We probably in the housing market have to go through a correction to get back to that place.”
A further increase is expected later in the year, of three-fourths, which would take the benchmark rate to 4.4 percent, including a three-fourth hike in November and by a half point in December. More rate hikes will follow next year.
[With Inputs from IANS]
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