Money
U.S. Fed prepares to slow down the economy to smash inflation
Mortgage repayments in the United States are on the rise again, with the Federal Reserve hiking rates by three-quarters of a percent.
The Fed is trying to push down runaway inflation without creating a recession.
It’s the most dramatic action taken by the Fed since the 1990s, and will impact loan repayments for millions of Americans.
Mortgages, car loans and credit cards will all be impacted.
Markets expected the move after Fed officials telegraphed the increase in a series of statements over recent weeks.
Central bankers say the priority is to bring down inflation, even if it slows down the economy.
Fed Chair Jerome Powell doesn’t believe the US economy is in recession.
But he says though growth was negative in the first quarter and was expected to be barely positive in the second quarter.
As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation,” Powell said.
Spending has softened
In its post-meeting statement, the rate-setting Federal Open Market Committee cautioned that “recent indicators of spending and production have softened.”
“Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low,” the committee added, using language similar to the June statement.
Officials describe inflation as “elevated” and ascribed the situation to supply chain issues and higher prices for food and energy along with “broader price pressures.”
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