How much ‘pain’ is the Fed willing to inflict? Wednesday’s rate hike will offer clues

Imposing another massive hike would mark the central bank’s toughest policy move in its fight against inflation since the 1980s — another period of sky-high prices. It would also likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for homes, cars and other loans.

The Fed’s anticipated actions would increase the rate that banks charge each other for overnight borrowing to 3-3.25%, the highest since the 2008 global financial crisis.

Federal Reserve Chairman Jerome Powell has acknowledged the economic pain this rapid tightening regime may cause.

“We must keep at it until the job is done,” he said at an August central bankers’ forum in Jackson Hole, Wyoming. “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would…

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