Recession fears mount

Stock market plunges to new lows

Federal Reserve Chair Jerome Powell has pledged to do whatever it takes to curb inflation, now raging at a four-decade high and defying the Fed’s efforts so far to tame it. Increasingly, it seems, doing so might require the one painful thing the Fed has sought to avoid: A recession.

A worse-than-expected inflation report for May — consumer prices rocketed up 8.6% from a year earlier, the biggest jump since 1981 — helped spur the Fed to raise its benchmark interest rate by three-quarters of point Wednesday. Not since 1994 has the central bank raised its key rate by that much all at once. And until Friday’s nasty inflation report, traders and economists had expected a rate hike of just half a percentage point Wednesday. What’s more, several more hikes are coming.

The “soft landing” the Fed has hoped to achieve — slowing inflation to its 2% goal without derailing the economy — is becoming both trickier and riskier than Powell had bargained for. Each rate hike means higher borrowing costs for consumers and businesses. And each time would-be borrowers find loan rates prohibitively expensive, the resulting drop in spending weakens confidence, job growth and overall economic vigor.

https://apnews.com/

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