Fed slows interest rate increases with 50-basis-point hike, but signals more to come

• December 16, 2022
• realestatelife
• Announcements, Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

The Federal Reserve on Wednesday raised its benchmark interest rate by 50 basis points, slowing its campaign to cool the economy amid early signs that stubbornly high inflation is finally starting to ease.

The widely expected move puts the key benchmark federal funds rate at a range of 4.25% to 4.5%, the highest since before the 2008 financial crisis, from near-zero in March. It marks the seventh consecutive rate increase this year and puts interest rates in firmly restrictive territory.

While the rate hike is slightly smaller than the 75-basis-point increases approved at the past four meetings, it is still large by historical standards as the Fed continues to raise rates at the most rapid pace since 1980s.

In addition to the large rate hike, Fed officials laid out an aggressive path of rate increases for next year. New economic projections released after the two-day meeting show policymakers expect interest rates to hit 5.1% by the end of 2023, a far higher level than officials previously indicated in September.

“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 FOMC said in its statement.

The rate hike decision and the latest economic projections underscore just how committed the Fed is to wrangling inflation under control, even if that means risking an economic recession.