A U.S. Fed wary of inflation is set to raise rates to a 22-year peak. Will it be the last hike?
BNN Bloomberg
Even after inflation has steadily eased this year, the U.S. Federal Reserve's policymakers still think prices are rising too fast and are almost certain to lift their key interest rate by a quarter-point on Wednesday.
A rate increase, the 11th in 17 months, would raise the Fed's short-term rate to roughly 5.3 per cent, the highest level since 2001. As with its previous rate hikes, Wednesday's increase would likely further elevate the costs of mortgages, auto loans, credit cards and business borrowing.
Another hike is widely expected despite a run of encouraging news that has sent stock prices steadily higher, boosted consumer confidence and brightened hopes that the Fed can pull off a difficult “soft landing,” in which inflation would continue to slow toward the Fed’s 2 per cent target without sending the economy tumbling into a recession.
Inflation amounted to just 3 per cent in June compared with a year earlier, down drastically from a peak of 9.1 per cent in June of last year. Consumers are still spending more — crowding airplanes, traveling overseas and flocking to concerts and movie theaters. Businesses keep hiring, and the unemployment rate has stayed near half-century lows.
