Dawit Kebede

CUNA research: ‘Fed putting brakes on economy’

September 21, 2022

CUNA Senior Economist Dawit Kebede issued the following statement following the Federal Reserve meeting today:  

“The Federal Reserve raised interest rates by 75 basis points as expected, increasing the target rate between 3 - 3.25 percent. Members of the Federal Open Market Committee (FOMC) upped their year-end interest rate projection from 3.4% in June to 4.4%.

“This indicates that the Federal Reserve is putting the brakes on the economy faster than expected to bring inflation down to its 2% target. The FOMC median forecast for interest rates remains at or above 4% through 2024.  

“High interest rates restrict consumption and investment activity by raising the cost of borrowing funds. This slows the economy and increases the likelihood of a recession considering that the GDP has slipped the last two quarters.  

“The move will also increase the unemployment rate from its current low level. The intent is to create some slack in the labor market. Currently, labor demand is stronger than supply, leading to faster wage growth that is adding more Inflationary pressure.”