US Fed set to raise interest rates as recession fears mount

The Federal Reserve is expected to raise interest rates again on Wednesday as it tries to cool the economy and keep inflation in check.

President Joe Biden has become a political liability due to the high prices that are putting the squeeze on American families and businesses.

A contraction of the world's largest economy would be a bigger blow to the Fed's credibility and the world as a whole.

The last time US inflation got out of control was in the 1970s and early 1980s, and Fed Chair Powell has made it clear that officials will continue to act aggressively to cool the economy.

In the 1980s, it took tough action and a recession to bring prices down.

Many economists are expecting a third straight three-quarter point rate hike, which would be an unprecedented action since that era. A full point increase is a possibility.

Powell and other central bankers have been saying that a downturn is better than high inflation because of the pain it would cause.

Mickey Levy and Andrew Levin wrote in The Wall Street Journal that Fed officials have been overly optimistic since inflation started to accelerate.

There is a serious risk of high inflation.

The Federal Open Market Committee is expected to make a decision at 1600.

Powell's press conference after the meeting will be watched for clues on how much more the Fed will have to do before it declares victory in the inflation fight.

It's possible to avoid a downturn.

On top of global supply chain snarls and Covids in China, and other major central banks are taking action as well, inflation is a global phenomenon.

Christine Lagarde said that more increases are needed to stop inflation.

A strong job market and low unemployment give the US policymakers some flexibility to tackle high prices.

A short period of negative GDP in the first half of the year will be needed before inflation starts to come down.

The consumer price report for August showed a lot of increases despite the drop in gasoline prices.

Ian Shepherdson of Pantheon Macroeconomics thinks inflation has peaked and that rising wages bode well for the future.

He said that the US economy isn't in a recession.

Four times this year, the Fed has hiked the benchmark lending rate, including two straight three-quarter-point hikes in June and July.

The goal is to raise the cost of borrowing and cool demand, and it is having an impact on the housing market.

Recent statements from Fed officials indicate more rate hikes are coming and no cuts until inflation is under control -- dousing hopes that had built up in markets after the July policy meeting.

The forces needed to drive down inflation over the next year are now in place as the Fed ramps up the anti-inflation rhetoric.

The FOMC also will release the quarterly forecasts from members, which will show how they feel about the direction of the economy and the impact of the policy moves, and how soon inflation will come down.