New York, USA -The US Federal Reserve (the central bank) is likely to raise interest rates by three-quarters of a percentage point again on Wednesday, the fourth major increase in a row. Another such increase is still possible in December.
Now, the big question for many American investors and consumers is whether the Federal Reserve’s massive interest rate increases will send the economy into a recession.
There are hopes for a moderate pullback, but this is uncharted territory for the Fed. Previous Fed Chairs Alan Greenspan, Ben Bernanke, and current Treasury Secretary Janet Yellen did not have to raise interest rates so frequently in a row.
It is unclear what effect all of this tightening will have on the economy. The housing market is already showing signs of stress. Bond yields increased as a result of the Fed. As a result, mortgage rates have risen significantly this year. A growing number of Democratic lawmakers are also warning Fed Chair Jerome Powell and other Fed members and calling for a pause in rate hikes because they fear tighter monetary policy could lead to a recession.
However, as long as the job market remains strong, the Fed will likely continue to focus solely on its price stability mandate, ignoring all the talk about maximum employment.
After two consecutive quarters of economic contraction, a strong recovery in gross domestic product (GDP) in the third quarter may allay some, but not all, recession fears. It may also persuade the Fed to keep raising interest rates, even if doing so risks causing a recession in the future.
The Fed meeting takes place just two days before the next job market report is released. Economists predict that job growth will slow, but not significantly. According to Reuters, experts anticipate predict 200,000 new jobs in October, down from 263,000 in September.
The unemployment rate is expected to rise to 3.6% this month, from 3.5% in September. However, this is still near the lowest level in over a half-century.