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The Federal Reserve made history on Wednesday, approving a third consecutive 75-basis-point hike in an aggressive move to tackle the white-hot inflation that has been plaguing the US economy.
The supersized hike, which was unfathomable by markets just months ago, takes the central bank's benchmark lending rate to a new target range of 3%-3.25%. That's the highest the fed funds rate has been since the global financial crisis in 2008.
Wednesday's decision marks the Fed's toughest policy move since the 1980s to fight inflation. It will also likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for things like homes, cars, and credit cards.
"We must keep at it until the job is done," he said at an August central bankers' forum in Jackson Hole, Wyoming. "While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain," he warned.
The Fed's updated Summary of Economic Projections, released Wednesday, reflects that pain: The quarterly report showed a less optimistic outlook for economic growth and the labor market, with the median unemployment rate inching up to 4.4% in 2023, higher than the 3.9% Fed officials projected in June and substantially higher than the current rate of 3.7%.
