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Fed Raises Rates Once More, and Powell Vowed to Fight Inflation Without Giving Up

The Federal Reserve declared on Wednesday that it would not relent in its fight against the strongest outbreak of inflation in the United States since the 1980s, even if doing so results in a “sustained period” of economic gloom and a weakening labor market.

Fed Chair Jerome Powell was asked repeatedly whether the US economy was in or headed for a recession as he explained the rationale behind the sharpest interest rate increases in roughly four decades. Powell rejected this idea, noting that American businesses continue to hire more than 350,000 new employees each month.

“I do not think the U.S. is currently in a recession. It doesn’t make sense that the U.S. would be in recession,” he declared.

But the central bank’s overnight interest rate has now been raised from close to zero to a range between 2.25% and 2.50% thanks to the 75-basis-point rate rise announced by the Fed on Wednesday, together with prior measures in March, May, and June. Since Paul Volcker, a previous chair of the Federal Reserve battled double-digit inflation in the 1980s, that represents the fastest tightening of monetary policy.

This time, consumer prices haven’t yet surpassed the 10-percent threshold, but at 9.1 percent, they are near enough to up the stakes for the Fed and the Biden administration, which is particularly concerned about the topic in light of the upcoming legislative elections in November.

Powell recognized that the economy was slowing and would probably need to slow even more for the Fed to bring the pace of price increases back to earth, even if he said he did not believe a recession would be necessary to remedy the issue this time.

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