Fed Signals Smaller Rate Hikes But Ultimately Higher Rates

Fed Chair Powell signals the need for higher interest rates to rein in inflation

Fed Chair Jerome Powell - Press Conference 11/02/2022
Chip Somodevilla / Staff / Getty Images.

Stocks fell after the Federal Reserve hiked interest rates by 75 basis points for the fourth straight time and comments from Fed Chair Jerome Powell dashed hopes that the Fed would stop raising borrowing costs anytime soon. 

Officials indicated that the Fed would “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” However, they also suggested that “ongoing increases in the target range will be appropriate.” 

At his news conference, Fed Chair Powell dismissed the idea that the Fed might be pausing its aggressive rate campaign soon, though he expects a discussion at the next meeting about slowing the pace of rate hikes.

“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected," Powell said. He also suggested that the path to a soft landing for the economy may be more difficult.

Fed Funds Futures - December 2022 FOMC Meeting
CME Group.
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