In response to continuing core inflation, the Federal Reserve raised the federal funds rate by 75 basis points during this week’s meeting of the Federal Open Market Committee. This will raise the cost of credit throughout the economy, reduce aggregate demand, and lead to declines in output and employment.
This week’s rate hike may not be the last, given its price-stability mandate, the Fed will keep to its standard script, raising rates until declining economic activity translates into a lower core rate.
The above excerpt was originally published in MarketWatch.
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