The Federal Reserve and Bank of England are expected to announce major interest-rate hikes—the U.S. Central Bank reveals details at 2:30 pm Eastern time today.
Key Details
- The Federal Open Market Committee of the U.S. Federal Reserve is currently deliberating how much to raise interest rates in its efforts to curb inflation. It will announce its decision later today at its press conference.
- A Reuters poll of economists suggests that the market is expecting another 75-basis-point hike, followed by a subsequent 50-basis-point hike in December, raising interest rates to 4.25% to 4.5% by the end of the year.
- This will mark the fourth consecutive 75-basis-point hike for the Fed in 2022.
- “Stocks tumbled on Tuesday as a new month of trading commenced. Traders also assessed better-than-expected economic data and what it spells for Federal Reserve policy going forward,” says CNBC.
- The Bank of England is also expected to follow suit on Thursday with yet another 75-basis-point hike as well.
Why it’s News
The Fed’s decision is going to set the tone for the rest of the fiscal year. The Labor Department’s October jobs report will also be released on Friday and its announcement is going to set expectations for the overall direction of the economy, as the Fed’s monetary policy struggles to get a grasp on inflation.
The Fed has promised to continue hiking rates until inflation is under control. It is aiming to reduce inflation down to a controllable 2% but the third previous hike in September was followed by a 0.1% increase in inflation—raising the CPI to 8.3% for September. The announcement also caused a precipitous stock market collapse.
October’s inflation rate will be announced on November 10.
The Problem
The severity of the Fed’s response is going to be met with a negative economic reaction—as higher interest rates increase the risk of an artificially induced recession as the economy is purposely slowed down. As we previously reported, economists are warning this will hurt the working class.
“Its most aggressive tightening cycle in decades has brought with it ever bigger recession risks,” says Reuters.
“Each adverse [inflation] report and each adverse development in the outside world implies the Fed is going to have to do more in order to bring the situation under control. Doing more means a higher probability of a recession, and if [it] happens, in all likelihood a deeper recession,” says economist David Wilcox.
Backing up a Bit
The Bank of England—in addition to other European central banks—is also facing a runaway inflation crisis brought on by the European energy crisis. It is expected to announce yet another 75-basis-point hike on Thursday that will raise the country’s interest rate to the highest in 33 years.
“It will be the eighth consecutive jump in interest rates by the Bank but will represent the biggest increase since 1989,” says The Evening Standard.
