Federal Reserve announces another prime rate hike

The Federal Reserve hiked interest rates by three-quarters of a percentage point Wednesday, continuing to fight the strongest surge in inflation in 40 years. The Fed hinted at further rate hikes at a more moderate pace.

Fed Chairman Jerome Powell said a change in the pace of rate hikes could come immediately after the central bank’s next meeting in December, warning of lingering uncertainty about future hikes. He said the rate could end up being higher than projections made by Fed policymakers during the last meeting in September.

Speaking at a news conference after the Federal Open Market Committee’s (FOMC) decision announcing a fourth consecutive three-quarter-point hike in the prime rate, Powell said it was time to reconsider the pace of rate hikes.

“It could happen as soon as the next meeting or the next meeting,” Powell said. – No decision has been made yet. We will probably discuss it at the next meeting.”

The FOMC statement said it is “appropriate” to permanently increase the target rate range. Without ruling out any future decision, Fed officials said they would take into account “the cumulative tightening of monetary policy, the time lags with which monetary policy affects economic activity and inflation, and economic and financial market conditions.”

The language recognizes the broad debate that has unfolded over Fed policy tightening, the impact it is having on the U.S. economy and the world, and the danger that continued rate hikes could strain the financial system or trigger a recession.

The committee set the target federal funds rate at 0.75 percent, ranging from 3.75 percent to 4.00 percent, the highest since early 2008. The Fed has raised rates in its last six meetings since March.

The Fed said in a statement that officials remain “very attentive to inflation risks,” opening the door for further increases.

Federal Reserve guidance notes modest economic growth with solid job gains and low unemployment.

The signal of a possible end to the cycle of aggressive rate hikes initially sent stock and bond markets higher. Soon, however, Powell’s comment that rates were likely to rise more than previously thought triggered a reversal in the stock markets.

The Dow Jones Industrial Average lost 39.72 points, down 0.12%, the S&P 500 was down 29.21 points, or 0.76%, and the NASDAQ lost 135.12 points (down 1.24%) as of 3:25 p.m. ET.