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The Federal Reserve raised interest rates for the fourth straight time, according to The Wall Street Journal (subscription).

Another hike: Chairman Jerome Powell and the Fed have yet to pivot away from rate hikes as a tool to combat inflation. Powell has said that the Fed is considering slowing the rate rise to half a point at the next meeting, but that further increases could continue. 

• “Mr. Powell also cautioned that any slowing in the pace of rate increases shouldn’t send a signal that the Fed thought it was done raising rates.”

Mixed progress: Raising rates has proven to be an inconclusive remedy for the economy as domestic demand and the housing market have weakened, while “the job market has remained strong and inflation pressures have stayed elevated.”

• “Fed officials are also nervous tight labor markets could fuel persistent wage growth that boosts prices in the labor-intensive services sector. That could keep prices rising on everything from haircuts to car repairs to hotel stays even as prices fall for cars, furniture, and other goods where they surged last year. ”

Our take: “The statement provided clues that the Committee was ready to moderate the pace of rate increases, noting that the [Federal Open Market Committee] will ‘take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,’” said NAM Chief Economist Chad Moutray.

• “As such, the FOMC acknowledges that the full impacts of its actions will take time, and it recognizes that it does not want to overdo its tightening to the extent that it makes a recession inevitable.”
• “This language is consistent with a 50-basis-point increase at its Dec. 13–14 meeting, which I would expect, with 25-basis-point increases at each of the next two meetings [Jan. 31–Feb. 1, 2023 and March 21–22, 2023],” said Moutray. “The Federal Reserve would then hit the pause button, keeping rates at that elevated rate. In this scenario, the ‘terminal rate’ [or rate at which the FOMC would pause] would be 4.75% to 5.00%.”