Federal Reserve officials raised interest rates by 75 basis points for the second straight month. Chair Jerome Powell said a similar move was possible again, rejecting speculation that the US economy is in recession.
Policymakers, facing the hottest cost pressures in 40 years, lifted the target for the federal funds rate on Wednesday to a range of 2.25% to 2.5%. That takes the cumulative June-July increase to 150 basis points — the steepest since the price-fighting era of Paul Volcker in the early 1980s.
“While another unusually large increase could be appropriate at our next meeting,” that’s a decision that will depend on the data between now and then, Powell said during a press conference following a two-day policy gathering in Washington. Policymakers next gather on Sept. 20-21; the two monthly readings on inflation and employment due before then will help determine the Fed’s next move.
Powell also said the Fed would slow the pace of increases at some point. In addition, he said officials would set policy on a meeting-by-meeting basis rather than offer explicit guidance on the size of their next rate move, as he has done recently.
The latest increase puts rates near Fed policy makers’ estimates of neutral — the level that neither speeds up nor slows down the economy. Forecasts in mid-June showed officials expected to raise rates to about 3.4% this year and 3.8% in 2023.
Powell said those forecasts — which are above market expectations — were the best current guide of where the Fed was heading this year and into 2023.