US Fed begins policy meeting with the goal of taming inflation
- The US Federal Reserve is expected to announce another significant interest rate hike
- Fed is prepared to risk an economic slowdown in order to combat inflation
- The FOMC is likely to raise the benchmark borrowing rate by three-quarters of a percentage point
On Wednesday, the Federal Reserve is expected to announce another significant interest rate rise, the fourth this year, in a bid to alleviate pricing pressures that have been pinching American consumers.
The problem for policymakers is to control inflation before it gets dangerously entrenched, yet without plunging the world's largest economy into a global recession.
However, following a 9.1% increase in annual consumer prices in June, Fed Chair Jerome Powell has made it apparent Fed is prepared to risk an economic slowdown in order to combat inflation. As a result, central bankers will continue to raise interest rates until they can clearly see that the rate is returning to the 2% target.
The Federal Open Market Committee, which sets policy, is likely to raise the benchmark borrowing rate by three-quarters of a percentage point on Wednesday as part of its relentless push to temper demand and alleviate pricing pressures on American individuals and companies.
While prices have continued to grow, with housing prices reaching a new high, there are hints that the rate of increase is slowing, which may allow the central bank to ease off on rate hikes.
The Fed hiked the policy lending rate from zero at the start of the year to a range of 1.5% to 1.75%, pushing mortgage rates higher and slowing house sales for five months in a row.
Policymakers seek to design a "soft landing," controlling inflation without precipitating a slump, but economists warn that the route to success is becoming increasingly narrow, and it is possible to overshoot by being too aggressive.