via CNBC:
- The Federal Reserve on Wednesday enacted its second consecutive 0.75 percentage point interest rate increase, taking its benchmark rate to a range of 2.25%-2.5%.
- Chair Jerome Powell said there will be a point where the Fed starts to slow hikes to assess their impact.
- “We actually think we need a period of growth below potential in order to create some slack,” he said.
The Federal Reserve on Wednesday enacted its second consecutive 0.75 percentage point interest rate increase as it seeks to tamp down runaway inflation without creating a recession.
In taking the benchmark overnight borrowing rate up to a range of 2.25%-2.5%, the moves in June and July represent the most stringent consecutive action since the Fed began using the overnight funds rate as the principal tool of monetary policy in the early 1990s.
While the fed funds rate most directly impacts what banks charge each other for short-term loans, it feeds into a multitude of consumer products such as adjustable mortgages, auto loans and credit cards. The increase takes the funds rate to its highest level since December 2018.
Markets largely expected the move after Fed officials telegraphed the increase in a series of statements since the June meeting. Stocks hit their highs after Fed Chair Jerome Powell left the door open about its next move at the September meeting, saying it would depend on the data. Central bankers have emphasized the importance of bringing down inflation even if it means slowing the economy.
“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.