Fed Raises Interest Rate Again, Hints at Potential Pause

    Image copyright: The Hill

    The Facts

    • The US Federal Reserve (Fed) is staying true to its strategy in the fight against inflation as it raised its key interest rate by a quarter of a percentage point on Wednesday. The now roughly 5.1% rate is the central bank’s 10th consecutive hike and a 16-year high.

    • However, unlike recent rate hikes, the Fed did not say that more hikes are likely in its statement announcing its decision. Fed Chair Jerome Powell called the bank’s language a “meaningful change,” implying that a pause on rate hikes could happen.

    The Spin

    Narrative A

    The Federal Reserve has been abundantly clear that it will continue to pursue a tight monetary policy until inflation is under control, but this latest rate hike could bring even greater damage beyond stubborn inflation. While the Fed has not achieved its goal of curtailing prices, it must stop going down the track of endless rate hikes that hurt consumers and could drive unemployment to scary levels. Fighting inflation is important, but it's not the Fed’s only job.

    Narrative B

    The Fed is stuck between a rock and a hard place as it has persistent inflation on its left and banking collapses on its right. We have known for months that this recent rate hike was a certainty and that the Fed would stay true to its core goal of containing inflation. While it remains above its target, inflation has gone down in recent months. This is a sticky situation, but today's rate hike was a reasonable call.

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