Fed goes big again on rate hike -- but may get more cautious next time

The Federal Reserve lifted interest rates by 0.75 percentage point to combat inflation and signaled plans to keep raising them, though possibly in smaller increments.

Fed officials in a Wednesday policy statement acknowledged it could take time for rapid increases this year to be reflected in the economy. “The 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,” they said at the conclusion of a two-day meeting. …

Some officials have begun signaling their desire both to slow down the pace of increases soon and to potentially stop raising rates early next year—to see how their moves this year slow the economy. They want to reduce the risk of causing an unnecessarily sharp slowdown. Other officials have said it is too soon for those discussions because high inflation is proving to be so persistent and broad.

[Before they can start getting more incremental, they’ll need to see some evidence that inflation is cooling off. So far it hasn’t changed much at all after the initial big interest rate hikes earlier in the summer. — Ed]