The Federal Reserve is slowing down but aiming high.
The Fed raised its key short-term interest rate by half a percentage point on Wednesday, dialing back from recent outsized hikes as it makes the final play in its aggressive campaign to tame rising inflation.
But the central bank is forecasting a three-quarter point rise in rates next year, more than it previously estimated. Fed officials are thus signaling that they believe inflation is still too high and are not backing their hard-nosed fight to contain it despite growing recession risks.
In a statement after the two-day meeting, the Fed reiterated that “ongoing (rate) increases … would be appropriate” to bring annual inflation down to the Fed’s 2% target. Some economists calculate that “additional hikes” will be needed instead of the Fed, indicating that the Fed is close to easing the hiking cycle.
At a news conference, Fed Chairman Jerome Powell said recent reports showing that inflation eased in October and November were “welcome.”
“The report is very much what we expected and expected,” he said.
But he added, “This requires sufficient evidence to provide confidence that inflation is on a sustained downward path.” He said the Fed is looking for more such reports that show continued easing of rate hikes.