NOVEMBER 7, 2022 – FED DELIVERS THE EXPECTED 75 BP RATE INCREASE
The Fed raised rates by 0.75 percent last week as they try to tame high inflation. They have raised rates five times in the last six months and said they will consider the “cumulative tightening of monetary policy” in making its rate decisions from now on. However, they did make it clear that they believe more rate hikes are likely. Rates are now in the range of 3.75 to 4 percent.
The October jobs report was released after the Fed meeting last week. It showed the job market may be slowing slightly with unemployment rising to 3.7 percent as the economy added 261,000 new positions. Even though wages rose 0.1 percent month-over-month, on an annual basis wage increases have eased rising 4.7 percent in October down from 5 percent in September and a peak of 5.6 percent in March. The Fed is hoping their actions will slow the pace of wage increases, which could ease price pressures.
Fed Chair Powell will be clarifying the bank’s thought process at a conference on Wednesday. The Fed’s next policy meeting takes place December 13-14, following the release two more employment and consumer price inflation reports. The Fed hinted at a terminal rate in the range of 4.5 to 4.75 percent, but if the economy shows signs of slowing, it is likely they will reduce the rate of increases.