MNI: Fed Hikes 75 BPs On Path To 'Sufficiently Restrictive'

The Federal Reserve on Wednesday raised its benchmark interest rate by a widely expected 0.75 percentage point to a target range of 3.75% to 4% and added guidance on how it will determine the pace of future rate hikes that could open the door to smaller increases. 

It was the fourth consecutive 75 basis point increase in as many meetings, bringing this year's cumulative tightening of 375 basis points -- one of the most aggressive and compressed rate hike campaigns in the central bank's history. But the new guidance on future rate hikes opens the door for a smaller 50 basis point rise as soon as at its next meeting in December. 

"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," the FOMC said. 

"In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments." 

Job gains have been robust and the unemployment rate has stayed low, the FOMC said. Wall Street analysts expect U.S. employers to have added 196,000 jobs last month, slowing from 263,000 in September but still a solid gain. The jobless rate was 3.5%, a 50-year low.

But inflation remains elevated, the FOMC said. "The Committee is highly attentive to inflation risks," it said. 

The Fed's preferred inflation measure jumped 6.2% in the year to September, while core PCE rose 5.1%, both well above the official 2% goal. 

Markets await remarks from Fed Chair Jerome Powell at 2:30 ET for further explanation over whether the committee will scale back the size of its next hike. Powell said at the last meeting that rates had just entered territory that could be considered restrictive.