The Fed's rate increases since March 2022 have more than doubled mortgage rates, elevated the costs of auto loans, credit card borrowing and business loans and heightened the risk of a recession.
WASHINGTON — The Federal Reserve reinforced its fight against high inflation Wednesday by raising its key interest rate by a quarter-point to the highest level in 16 years. But the Fed also signaled that it may now pause the streak of 10 rate hikes that have made borrowing for consumers and businesses steadily more expensive.
“Inflation pressures continue to run high, and the process of getting getting inflation back down to 2% has a long way to go,” Chair Jerome Powell said at a news conference. The Fed is now also grappling with a standoff around the nation’s borrowing limit, which caps how much debt the government can issue. Congressional Republicans are demanding steep spending cuts as the price of agreeing to lift the nation’s borrowing cap.
Goldman Sachs estimates that a widespread pullback in bank lending could cut U.S. growth by 0.4 percentage point this year. That could be enough to cause a recession. In December, the Fed projected growth of just 0.5% in 2023.
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