Fed’s ‘soft landing’ hopes alive as it edges toward another big rate hike
September 8, 2022 | Howard Schneider & Ann Saphir
The Federal Reserve is “strongly committed” to fighting inflation and remains hopeful that can be done without the “very high social costs” involved in prior campaigns to control surging prices, Fed Chair Jerome Powell said on Thursday, in remarks echoed by other U.S. central bankers as they mull another potentially outsized interest rate increase.
Powell, in a 40-minute webcast interview with Cato Institute President Peter Goettler, was not asked about the U.S. central bank’s policy meeting later this month, when it is expected to raise its target interest rate by either half or three-quarters of a percentage point, and the Fed chief did not volunteer any information on his preference.
However, investors in contracts tied to the Fed’s policy rate currently anticipate the larger 75-basis-point increase, an expectation that rose through the day after the European Central Bank hiked its policy rate by three-quarters of a percentage point, a decline in U.S. weekly jobless claims pointed to continuing strength in the labor market, and one usually dovish Fed official indicated he was open to the idea.
The Fed “could very well do” a 75-basis-point increase at its Sept. 20-21 meeting, said Chicago Fed President Charles Evans, who has tended to be on the dovish side of monetary policy debates. That would mark the third such large increase in a row and push the Fed’s target interest rate above 3% for the first time since 2008.
“We are going to have a conversation about that,” Evans said. “I’m going to be listening to everybody. My mind is not made up.”
