US Fed hikes interest rates by 75 basis points to tame inflation, says country not in recession

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U.S. Federal Reserve Chair Jerome Powell announced at a press conference on Wednesday that the central bank raised its benchmark interest rate by a hefty three-quarters of a point for the second consecutive time, in its most aggressive drive in three decades to tame high inflation.

The Fed’s move will raise its key rate, which affects many consumer and business loans, to a range of 2.25 per cent to 2.5 per cent, its highest level since 2018. Powell indicated “an even larger move” may be possible for the future but that decisions will be made on a “meeting to meeting” basis, following the central bank's latest two-day policy meeting.

In response to a reporter’s question about whether the U.S. is currently in a recession, Powell said that "I don't think the economy is in recession right now," pointing to examples of the labour market as indicators of strength despite slowed growth. But officials do believe the economy needs a period of below-potential growth to create sufficient slack to lower inflation

Should the economy continue to show signs of slowing, analysts predict the Fed may moderate the size of its rate hikes as soon as its next meeting in September, perhaps to a half-point. Such an increase, followed by possibly quarter-point hikes in November and December, would still raise the Fed’s short-term rate to 3.25 per cent to 3.5 per cent by year’s end — the highest point since 2008.