The Federal Reserve implemented its sixth consecutive interest rate increase in November. Fed policymakers voted unanimously to increase the key federal funds rate by 75 basis points to a range of 3.75% to 4%, taking it to its highest level since January 2008.
- The Fed raised its key rate to a target range of 3.75% to 4%
- This was the fourth 75 bp increase since June
- Rates are expected to continue to climb
The Federal Reserve (Fed) implemented its sixth consecutive interest rate increase in November. Fed policymakers voted unanimously to increase the key federal funds rate by 75 basis points to a range of 3.75% to 4%, taking it to its highest level since January 2008 . This was the fourth consecutive increase of 75 basis points since June.
“The ultimate level of interest rate increases will be higher than expected” (Fed Chair Powell)
Rates are widely expected to continue to rise. Although Fed Chair Jerome Powell commented that "at some point … it will become appropriate to slow the pace of increases”, he also warned: “We still have some ways to go… the ultimate level of interest rate increases will be higher than expected. He also reiterated the Fed’s warning that reducing inflation is likely to require a “sustained period of below-trend growth” alongside softer conditions in the labour market.
The annualised rate of consumer price inflation in the US remains stubbornly high: although it eased slightly in September from 8.3% to 8.2%, it is still well above the Fed’s target rate of 2%. Inflationary pressures continue to be driven by high costs for energy, food, housing, and health care. The International Monetary Fund (IMF) expects consumer price inflation in the US to average 8.1% in 2022 before moderating to 3.5% in 2023. The IMF warned that stubborn pricing pressures are proving to be “a major source of concern for policymakers” and also highlighted the impact of US dollar strength on broader inflationary pressures around the world.
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