Christopher Lugerber, AP Business Writer
WASHINGTON (AP) — With inflation at its highest level in 40 years, a strong job market and consumers still spending, the Federal Reserve (Fed) must continue to hike rates aggressively. are under pressure to
At the end of its final monetary policy meeting on Wednesday afternoon, the Fed should raise key rates by three-quarters of a percentage point for the second time in a row, keeping them within the 2.25% to 2.5% range. It’s the Fed’s fourth rate hike since his March. Since then, central banks have tightened credit increasingly aggressively.
Chairman Jerome Powell’s press conference on Wednesday, and any signal regarding the Fed’s next steps, would be of great interest.
The Federal Reserve is making it more expensive to get a mortgage, car loan, or business loan by raising lending rates. As a result, consumers and businesses are likely to borrow and spend less, cooling the economy and slowing inflation. The Federal Reserve’s interest rate hike has already doubled the average 30-year fixed mortgage rate to 5.5% last year, and home sales have plummeted. Central banks are betting that they can slow growth enough to keep inflation under control, but not enough to trigger a recession.
Some analysts have pointed to signs of an economic slowdown and may even have contracted in the first half. As a result, they fear the Federal Reserve will tighten credit too quickly, triggering a recession that will ultimately lead to layoffs and increased unemployment.
Meanwhile, rising inflation and fears of a recession are undermining consumer confidence and raising public concerns about the economy, showing mixed and frustrating signs. As the November midterm elections approach, American dissatisfaction is sapping President Joe Biden’s approval ratings and increasing the likelihood that Democrats will lose control of the House and Senate.
When the government estimates gross domestic product for the April-June period on Thursday, some economists believe it may indicate the economy has contracted for a second straight quarter. This answers the long-held hypothesis that a recession will begin.
But economists say that doesn’t mean the recession has started. Employers added his 2.7 million jobs in the same six months when the economy was likely to contract. This surpasses what most pre-pandemic years have yielded. Wages are also rising at a healthy pace, and many employers are still struggling to attract and retain enough workers.
The most widely accepted definition of a recession is the National Economy, a group of economists whose Business Cycle Data Board defines a recession as “a significant decline in economic activity that spreads across the economy and lasts more than 2000 years.” determined by the Research Office. Several months. “The committee considers a variety of factors before publicly declaring the end of a boom and the birth of a recession.
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