CUNA economics: Fed meeting may signal smaller rate hikes

CUNA Senior Economist Dawit Kebede, PhD, issued the following statement following the Federal Reserve meeting Wednesday.

“The Federal Reserve raised the benchmark interest rate by 75 basis points for a fourth consecutive time, increasing the target range to 3.75 - 4 percent. The Federal Open Market Committee's (FOMC) press release reiterated its commitment to bring inflation down to 2 percent. However, it stated that future rate increases will consider the lag with which monetary policy affects economic activity and inflation. 

“This may signal smaller rate increases in future meetings. The FOMC raised rates faster and higher from close to zero levels in March. The tight monetary policy has increased the cost of borrowing for households and businesses. The impact caused noticeable declines in residential investment and housing market. It is expected to bring further slowdown in economic activity in other sectors.

“Currently, inflation is still high. The labor market remains tight but there are indications that increased employment cost has moderated. This is a step in the right direction for the Fed because it reduces wage pressures on inflation.”