The Federal Reserve is expected to this week slow the pace at which it raises interest rates, while signalling that it is not yet close to pausing its historic campaign to tighten monetary policy given persistent inflationary pressures.
After struggling this year to adjust policy fast enough to catch up with inflation, the Federal Open Market Committee is poised at its final gathering of 2022 to end a string of 0.75 percentage point rate rises that began in June. It will instead opt for a half-point move, which would lift the federal funds rate to a range of 4.25 per cent and 4.5 per cent.
The Fed’s message is that a slower pace of rate rises does not mean it is less committed to getting inflation down to 2 per cent. Officials on Wednesday will signal yet more monetary tightening next year, and again emphasise the need to keep rates at an elevated level for an extended period.