NATIONAL NEWS

Fed begins inflation fight with key rate hike, more to come

Mar 16, 2022, 12:07 PM | Updated: Jun 13, 2022, 3:38 pm
Federal Reserve Chairman Jerome Powell testifies during the Senate Banking Committee hearing titled...
Federal Reserve Chairman Jerome Powell testifies during the Senate Banking Committee hearing titled “The Semiannual Monetary Policy Report to the Congress” in Dirksen Building in Washington, D.C., on Thursday, March 3, 2022. (Tom Williams/CQ Roll Call)
(Tom Williams/CQ Roll Call)

WASHINGTON (AP) — The Federal Reserve launched a high-risk effort Wednesday to tame the worst inflation since the 1970s, raising its benchmark short-term interest rate and signaling potentially up to seven rate hikes this year.

The Fed’s quarter-point hike in its key rate, which it had pinned near zero since the pandemic recession struck two years ago, marks the start of its effort to curb the high inflation that has followed the recovery from the recession. The rate hikes will eventually mean higher loan rates for many consumers and businesses.

The central bank’s policymakers expect inflation to remain elevated and to end 2022 at 4.3%, according to updated quarterly projections they released Wednesday. That’s far above the Fed’s 2% annual target. The officials also now forecast much slower economic growth this year, of 2.8%, down from its 4% estimate in December.

Chair Jerome Powell is steering the Fed into a sharp U-turn. Officials had kept rates ultra-low to support growth and hiring during the recession and its aftermath. As recently as December, Fed officials had expected to raise rates just three times this year. Now, its projected seven hikes would raise its short-term rate to 1.875% at the end of 2022. It could increase rates by a half-point at future meetings.

Fed officials also forecast four additional hikes in 2023, boosting its benchmark rate to 2.8%. That would be the highest level since March 2008. Borrowing costs for mortgage loans, credit cards and auto loans will likely rise as a result.

Powell is hoping that the rate hikes will achieve a difficult and narrow objective: Raising borrowing costs enough to slow growth and tame high inflation, yet not so much as to topple the economy into recession.

Yet many economists worry that with inflation already so high — it reached 7.9% in February, the worst in four decades — and with Russia’s invasion of Ukraine driving up gas prices, the Fed may have to raise rates even higher than it now expects and potentially tip the economy into recession.

By its own admission, the central bank underestimated the breadth and persistence of high inflation after the pandemic struck. Many economists say the Fed made its task riskier by waiting too long to begin raising rates.

KSL 5 TV Live

Top Stories

National News

FILE: Residents wait in line to vote early outside a polling station on November 29, 2022 in Atlant...
Bill Barrow and Jeff Amy, Associated Press

Warnock or Walker? Georgia runoff to settle last Senate seat

Georgia voters on Tuesday are deciding the final Senate contest in the country, choosing between Democratic Sen. Raphael Warnock and Republican football legend Herschel Walker.
8 hours ago
Kirstie Alley enters the Celebrity Big Brother house at Elstree Studios on August 16, 2018 in Boreh...
Associated Press

Kirstie Alley, Emmy-winning ‘Cheers’ star, dies at 71

Kirstie Alley, a two-time Emmy winner who starred in the 1980s sitcom “Cheers” and the hit film “Look Who’s Talking,” has died. She was 71.
1 day ago
FILE (Mohave County (AZ) Sheriff's Office)...
Michael Houck

Arizona authorities investigate possible homicide in remote desert area

Authorities found a dead man in a remote area of the Arizona desert Sunday morning.
1 day ago
A TSA spokesman tweeted an image of the the weapons -- 3 saw blades, nunchucks, a switchblade and a...
Forrest Brown, CNN

TSA removes nunchucks, saw blades and more from carry-on bag in New York

One airline passenger thought it was a dandy idea to place a six-pack of sharp or potentially dangerous items into his carry-on bag at LaGuardia Airport in New York City on Sunday.
1 day ago
A coyote attacked a 2-year-old girl in front of her house Friday afternoon in front of her house in...
David Williams, CNN

Coyote attacked 2-year-old girl in front of her Los Angeles house

A 2-year-old girl is recovering after being attacked by a coyote Friday afternoon in front of her house in a Los Angeles neighborhood.
1 day ago
LAS VEGAS, NEVADA - MARCH 07: Co-host Dolly Parton speaks onstage during the 57th Academy of Countr...
Eliza Pace

Dolly Parton joins Tiktok: ‘Better late than never!’

Dolly Parton has officially joined Tiktok.
1 day ago

Sponsored Articles

house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 reasons you may want to consider apartment life over owning a home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Take this quiz before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t let a ransomware attack get you down | Protect your workplace today with cyber insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
Fed begins inflation fight with key rate hike, more to come