NATIONAL NEWS

Powell likely to be pressed on whether Fed will slow hikes

Nov 2, 2022, 6:59 AM
Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market ...
Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting on May 04, 2022 in Washington, DC. Powell announced the Federal Reserve is raising interest rates by a half-percentage point to combat record high inflation. This is Powell's first in-person news conference since the pandemic began. (Photo by Win McNamee/Getty Images)
(Photo by Win McNamee/Getty Images)

WASHINGTON (AP) — Looming over the Federal Reserve meeting that ends Wednesday is a question of intense interest: Just how high will the Fed’s inflation-fighters raise interest rates — and might they slow their rate hikes as soon as next month?

The Fed on Wednesday is expected to announce a hefty three-quarter-point hike in its key short-term rate — its fourth straight — which will lead to still-higher loan rates for many businesses and consumers. What many Fed-watchers hope is that Chair Jerome Powell will hint at a news conference that the central bank may ease the pace of its hikes, perhaps to a half-point in December and two quarter-point hikes next year.

Even at that more moderate pace, the central bank’s benchmark rate would reach 4.75% to 5%, which would be its highest range since 2007, up from the current 3% to 3.25%. Fed officials have stressed that they need to sharply raise rates to tame inflation, which reached 8.2% in September from 12 months earlier, barely below a 40-year high. Chronic inflation has also become a central point of attack for Republicans against Democrats in the midterm congressional elections.

So far this year, the Fed has raised its key rate five times in an aggressive pace that has sent borrowing rates surging across the economy and heightened the risk of a recession. The home market, in particular, has been badly bruised as a consequence. The average rate on a 30-year fixed mortgage, just 3.14% a year ago, surpassed 7% last week, mortgage buyer Freddie Mac reported. Sales of existing homes have dropped for eight straight months.

One reason the Fed’s policymakers might feel they can soon slow the pace of their rate hikes is that some early signs suggest that inflation could start declining in 2023. Consumer spending, squeezed by high prices and costlier loans, is barely growing. Supply chain snarls are easing, which means fewer shortages of goods and parts. Wage growth is plateauing, which, if followed by declines, would reduce inflationary pressures.

Still, the job market remains consistently strong, which could make it harder for the Fed to cool the economy and curb inflation. On Tuesday, the government reported that companies posted more job openings in September than in August. There are now 1.9 available jobs for each unemployed worker, an unusually large supply.

A ratio that high means that employers will likely continue to raise pay to attract and keep workers. Those higher labor costs are often passed on to customers in the form of higher prices, thereby fueling more inflation.

If Powell does signal Wednesday that the Fed may lift its foot slightly off the economic brakes, it could spark a rally in stock and bond prices. Such higher asset prices, though, might then fuel more spending just when the Fed wants to cool things down to throttle inflation.

To offset any potential burst of optimism, the Fed may signal at its next meeting in December that it expects to add at least another rate hike early next year. That would serve to make borrowing even more expensive and would further heighten the risk of a recession.

Ultimately, economists at Goldman Sachs expect the Fed’s policymakers to raise their key rate to nearly 5% by March. That is above what the Fed itself had projected in its previous set of forecasts in September.

For now, many Fed officials have said they see few signs that inflation is easing in any sustainable way. They point, in particular, to so-called core inflation, which excludes volatile food and energy costs and is considered a good reflection of underlying price pressures.

“We need to see actual progress in core inflation and services inflation,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said recently. “And we are not seeing it yet.”

KSL 5 TV Live

Top Stories

National News

WASHINGTON, DC - JANUARY 18: U.S. Surgeon General Vivek Murthy speaks during the United States Conf...
Allison Gordon and Pamela Brown

Surgeon General says 13 is ‘too early’ to join social media

US Surgeon General Vivek Murthy says he believes 13 is too young for children to be on social media platforms.
19 hours ago
Saginaw Police K9 Cigan sits behind a table with evidence found inside a stolen car. (WNEM)...
Anna Kathman

Stolen vehicle, multiple drugs located by Michigan K9 officer

Saginaw Police said two suspects are behind bars after a stolen vehicle was located during a traffic stop by a K9 officer.
19 hours ago
A 29-year old woman has been arrested after allegedly posing as a teenager and attending classes at...
Kiely Westhoff and Zoe Sottile, CNN

29-year-old woman posed as high school teen facing charges in New Jersey, police say

A 29-year-old New Jersey woman is facing charges over claims she used false government documents in a ploy to pose as a teenager at a high school, according to police.
19 hours ago
Former U.S. President Donald Trump speaks during an election night event at Mar-a-Lago on November ...
Meg Kinnard and Michelle L. Price

Trump says beating of Nichols ‘never should have happened’

Former President Donald Trump says the footage of the brutal beating of Tyre Nichols by five Memphis police officers is “horrible” and that the attack “never should have happened.”
2 days ago
One the of climbers in the training camp climbing a wall. (KSL-TV's Alex Cabrero)...
Alex Cabrero

USA Climbing Camp for Paris 2024 begins in Salt Lake City

As the Summer 2024 Olympic Games draws closer, those athletes looking to participate begin their training. 
2 days ago
MEMPHIS, TENNESSEE - SEPTEMBER 7:  Police investigate the scene of a reported carjacking reportedly...
Adrian Sainz

Memphis police disband unit that fatally beat Tyre Nichols

The Memphis Police Department has disbanded the special unit whose officers beat to death motorist Tyre Nichols
2 days ago

Sponsored Articles

Fiber Optical cables connected to an optic ports and Network cables connected to ethernet ports...
Brian Huston, CE and Anthony Perkins, BICSI

Why Every Business Needs a Structured Cabling System

A structured cabling system benefits businesses by giving you faster processing speeds and making your network more efficient and reliable.
notebook with password notes highlighted...
PC Laptops

How to Create Strong Passwords You Can Actually Remember

Learn how you can create strong passwords that are actually easy to remember! In a short time you can create new ones in seconds.
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.
Powell likely to be pressed on whether Fed will slow hikes