WATCH LIVE | Fed Chair Powell discusses latest rate hike, US economic outlook

WASHINGTON (AP) — The Federal Reserve raised its benchmark interest rate by three-quarters of a point Wednesday for the fourth time in a row, but hinted it may soon scale back the hike.

Fed Chairman Jerome Powell is set to discuss a rate hike at 1:30 p.m. His press conference will be streamed live as part of this story.

The Fed’s move raised the key short-term rate to a range of 3.75% to 4%, the highest level in 15 years. It was the central bank’s sixth rate hike this year, a series that has made mortgages and other consumer and business loans increasingly expensive and raised the risk of a recession.

Persistence of inflated prices and higher borrowing costs have undermined the ability of Democrats to campaign for the robust health of the labor market as they try to retain control of Congress. Republican candidates hammered Democrats over the harsh effects of inflation ahead of Tuesday’s midterm elections.

The Fed’s statement on Wednesday came after its latest policy meeting. Many economists expect Chairman Jerome Powell to signal at a press conference that the Fed’s next expected rate hike in December may be only half a point, not three-quarters.

Typically, the Fed raises rates in quarter-point increments. But after Powell erred in downplaying inflation last year as likely to be transitory, he led the Fed to raise rates aggressively to try to slow borrowing and spending and ease price pressures.

Wednesday’s latest rate hike coincided with growing concerns that the Fed could tighten lending so much that it disrupts the economy. The government said the economy grew last quarter and employers continued to hire at a solid pace. But the housing market has collapsed, and consumers are barely increasing their spending.

THIS IS BREAKING NEWS. Earlier AP history is below.

WASHINGTON (AP) – The Federal Reserve’s meeting, which ends on Wednesday, is approaching a question of great interest: How high will the inflation-fighting Fed raise interest rates, and could they slow rate hikes next month?

The Fed is expected to announce a big hike in its key short-term rate by three-quarters of a point on Wednesday – the fourth in a row – leading to even higher loan rates for many businesses and consumers. With many Fed watchers hoping Chairman Jerome Powell will hint at a press conference that the central bank may ease the pace of its rate hikes, perhaps by half a point in December and two quarter-point hikes next year.

Even with these more moderate rates, the central bank’s benchmark rate will reach between 4.75% and 5%, the highest range since 2007, from the current 3% to 3.25%. Fed officials stressed that they need to raise rates sharply to curb inflation, which reached 8.2% in September compared to 12 months earlierjust below a 40-year high. Chronic inflation has also been a focus of attack for Republicans against Democrats in midterm congressional elections.

The Fed has raised its key rate five times this year at an aggressive pace, sending borrowing rates soaring across the economy and raising the risk of a recession. In particular, the domestic market was hit hard. The average rate on a 30-year fixed mortgage, just 3.14% a year ago, last week exceeded 7%., Freddie Mac mortgage buyer said. Existing home sales have declined for eight consecutive months.

One of the reasons that Fed policymakers may feel they can soon slow the pace of rate hikes is that some early signs suggest that inflation may begin to decline in 2023. consumer spending, squeezed by high prices and more expensive loans, almost does not grow. Bottlenecks in the supply chain are reduced, which means fewer shortages of goods and parts. Wage growth is plateauing, which, if followed by a decline, would reduce inflationary pressures.

However, the labor market remains consistently strong, which could make it more difficult for the Fed to cool the economy and curb inflation. On Tuesday, the government reported that companies posted more job vacancies in September than in August. There are now 1.9 job openings for every unemployed person, which is an unusually large supply.

Such a high ratio means that employers will likely continue to raise wages to attract and retain workers. These higher labor costs are often passed on to customers in the form of higher prices, contributing to higher inflation.

If Powell signals on Wednesday that the Fed may ease the economic brakes a bit, that could send stocks and bonds soaring. However, such higher asset prices could lead to higher spending at a time when the Fed is looking to cool things down to quell inflation.

To offset any potential surge in optimism, the Fed may signal at its next meeting in December that it expects at least one more rate hike early next year. This will make borrowing even more expensive and further increase the risk of a recession.

After all, Goldman Sachs economists expect Fed policymakers to raise their key rate to nearly 5% by March. That’s higher than the Fed itself predicted in its previous set of forecasts in September.

For now, many Fed officials have said they see little sign that inflation is steadily declining. They point in particular to so-called core inflation, which excludes volatile food and energy costs and is considered a good reflection of underlying price pressures.

“We need to see real progress in core inflation and services inflation,” Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, said recently. “And we don’t see that yet.”