The Federal Reserve pumped up its benchmark interest rate Wednesday by three-quarters of a point for a fourth straight time but hinted that it could soon reduce the size of its rate hikes. The Federal Reserve's resolve to get inflation under control by raising interest rates will continue to brake the economy into the coming year, though it may not hasten a recession, according to assessments by a Fed governor and others in Phoenix on Wednesday.
The hope is that the central bank can put a lid on consumer prices without pushing the economy into a tailspin, with all of the hardship that could entail. Speakers at an Economic Forecast Luncheon hosted by Arizona State University largely refrained from mentioning the"R" word, recession, even as they underscored the need to cool off the economy — especially employment.
"It's way too early to conclude inflation is heading substantially lower," warned Christopher Waller, the keynote speaker and a member of the Fed's board of governors."More interest rates hikes are needed to get inflation down."Waller shied away from answering the million-dollar question — how high interest rates will need to go, or for how long.
He fears that rising employment costs could become endemic and increase inflationary expectations, which would make it harder to wring inflation out of the system. Along with wages, price trends for rents and various tangible goods are other areas of focus for him. "It's way too early to conclude that inflation is heading substantially down," Waller said, and he drew a distinction between today's Fed and a hesitant board in the 1970s that couldn't lick the inflation problem and suffered a credibility blow as a result.
Of course the liberal university will not talk about a recession.