if the fed wishes to reduce the federal funds rate it could

“The focus is greatly on inflation right now.” are saying is that restoring price stability is the primary focus - if they risk a mild recession, or a bumpy soft landing, that would still be successful,” said Kathy Bostjancic, chief U.S. “What Powell and the rest of the F.O.M.C. They also foresee the Fed’s policy rate peaking at 3.8 percent at the end of 2023, up from 2.8 percent when projections were last released in March.Īs rates rise, policymakers anticipate that growth will slow and joblessness will climb slightly, starting this year. Officials expect interest rates to hit 3.4 percent by the end of 2022, according to economic projections they released Wednesday, which would be the highest level since 2008. Powell signaled that the debate at the Federal Open Market Committee’s next meeting in July will be over whether to raise rates half a point or to repeat an increase of three-quarters of a point, though he added that he did “not expect moves of this size to be common.” The latest move set the Fed’s policy rate in a range of 1.50 percent to 1.75 percent, and more rate increases are to come. Powell said, explaining that the Fed still wants to reduce inflation to its 2 percent goal while keeping the labor market strong - an outcome economists call a “soft landing.”īut “those pathways have become much more challenging due to factors that are outside of our control,” he said, later adding that “the environment has become more difficult, clearly, in the last four or five months.” “We’re not trying to induce a recession right now, let’s be clear about that,” Mr. If the Fed has to quash demand to an extreme degree in an effort to bring it into line with limited supply, it could make for a slump that leaves businesses shuttered and people unemployed. Powell acknowledged that it was becoming increasingly difficult for the Fed to slow inflation without causing a recession as outside forces, including the war in Ukraine and factory shutdowns in China, threaten to curb the supply of goods and commodities like oil. Officials expect growth to moderate in the coming months and years and predicted that unemployment will rise about half a percentage point to 4.1 percent by late 2024 as their policy squeezes companies and workers. As central bankers drive their policy rate rapidly higher, it will make buying a home or expanding a business more expensive, restraining spending and slowing the broader economy.

If the fed wishes to reduce the federal funds rate it could