Why the Federal Reserve will keep raising interest rates

The current rate-tightening cycle is far from over.

On Wednesday, the Federal Open Market Committee, the Federal Reserve's interest rate-setting body, will again raise rates aggressively, almost certainly by 75 basis points. Equally important, in its statement accompanying the rate-setting decision on Wednesday afternoon, the FOMC will likely signal that it will hike by an additional 75 basis points at its early November meeting, just a handful of days before the midterm elections.

The FOMC statement accompanying the rate hiking decision will contain few changes from the statement made in July when the Fed raised rates by 75 basis points. In July, the Fed said consumption and production "have softened" but that employment is robust and resilient. This time, the FOMC is likely to state explicitly that "inflation remains elevated."
Money by Ervins Strauhmanis is licensed under flickr Attribution 2.0 Generic (CC BY 2.0)

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