The Fed May Discuss the Biggest Interest Rate Increase Since 1994

The Federal Reserve is likely to discuss making its biggest interest rate increase since 1994 at its meeting this week, as a range of new data suggest that inflation is coming in hotter and proving more stubborn than policymakers had hoped. From a report: Central bankers have been promising to be nimble as they fight inflation -- a stance that will probably prompt them to at least discuss whether to raise interest rates by three-quarters of a percentage point on Wednesday, when officials are set to release both their decision and a fresh set of economic projections. The Fed raised rates by half a percentage point in May and officials had suggested for weeks that a similar increase would be warranted at their meetings in June and July if data evolved as expected. But costs have not behaved as anticipated. Instead, a report last week showed that inflation re-accelerated in May and is running at the fastest pace since 1981. Two separate measures of inflation expectations, one out last week and another released Monday, showed that consumers were beginning to anticipate notably faster price increases. That is sure to increase the sense of unease at the Fed, which is trying to quash high inflation before it changes behavior and becomes a more permanent feature of the economic backdrop. Jerome H. Powell, the Fed chair, and other officials have repeatedly stressed the need to bring prices back down to a stable level to ensure a healthy economy. The string of worrying news has caused economists and investors alike to bet that the central bank will begin to raise interest rates at a more rapid clip to signal that it recognizes the problem and is making fighting inflation a priority.

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