Yet many economists think the Fed is already acting too late. Even as inflation has soared, the Fed’s benchmark rate is in a range of just 0.25% to 0.5%, a level low enough to stimulate growth. Adjusted for inflation, the Fed’s key rate — which influences many consumer and business loans — is deep in negative territory.
Yet with inflation having surged to a 40-year high, the Fed has come under extraordinary pressure to act aggressively to slow spending and curb the price spikes that are bedeviling households and companies, reports the AP.
After its latest rate-setting meeting ends Wednesday, the Fed will almost certainly announce that it’s raising its benchmark short-term interest rate by a half-percentage point — the sharpest rate hike since 2000. The Fed will likely carry out another half-point rate hike at its next meeting in June and possibly at the next one after that, in July. Economists foresee still further rate hikes in the months to follow.
What’s more, the Fed is also expected to announce Wednesday that it will begin quickly shrinking its vast stockpile of Treasury and mortgage bonds beginning in June — a move that will have the effect of further tightening credit.
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