Fed Hikes Benchmark Bank Rate by 75 bps, Elizabeth Warren Says Central Bank Could ‘Trigger a Devastating Recession’

The U.S. Federal Reserve raised the Federal Funds Rate by 75 basis points (bps) on Wednesday in an effort to curb inflation and stabilize the U.S. economy. This is the third rate hike for the U.S. central bank since it raised its benchmark rate by 50 basis points last March.

The Fed raised rates 75 bps for the second time to curb inflation, with the central bank saying that “inflation remains high.”

With inflation scorching hot in the U.S., the U.S. Federal Reserve once again raised the federal funds rate by 75 bps at 2 p.m. EDT on Wednesday. This hike was the second 75 bps increase in the rate.

“Recent indicators of consumption and production have softened. Nonetheless, job growth has been strong in recent months and the unemployment rate remains low,” the Fed said in apress releaseon Wednesday.”Inflation remains high, reflecting pandemic-related supply and demand imbalances, higher food and energy prices, and broader price pressures.

The move follows the recent Consumer Price Index (CPI) report, which noted that CPI data reflected a 9.1% year-over-year increase. June’s CPI data was the fastest annual increase since 1981.

It also comes after the recent debate over the technical definition of “recession.” Last week, the White House published two blog posts arguing that two consecutive quarters of negative gross domestic product (GDP) does not indicate that the United States is in recession.

One of the Biden administration blog posts featured Treasury Secretary Janet Yellen, who confirmed that websites like Investopediadefine a recession as a recessionand consider it not a “technical definition” of a recession, despite textbooks on economic resources and the business cycle.

After the White House and Yellen’s comments on the recession, economist Paul Krugmansaid In a recently published blog post, he said, “Ignore the 2/4 rule… We may be in a recession, but we are not in a recession now.” This comes after Krugman apologized for being wrong about inflation.

At a Fed meeting this month, the U.S. central bank argued that Russia is hurting the global economy.” Russia’s war against Ukraine is causing tremendous human and economic hardship,” members of the Federal Open Market Committee (FOMC) said Wednesday. The war and related events “have exerted additional upward pressure on inflation and are weighing on global economic activity. The Committee is paying strong attention to inflation risks.”

“The [FOMC] seeks to achieve maximum employment and inflation at a rate of 2 percent over the longer run,” the Federal Reserve’s press The statement added: “In support of these goals, the Committee has decided to raise the target range for the federal funds rate from 2-1/4 to 2-1/2 percent and expects a continued increase in the target range to be appropriate.”

Massachusetts Senator Says Hard Central Banking Will Cause Recession

In addition to the Fed’s recent rate hikes, Senator Elizabeth Warren, R-Mass. published a blog post through the Wall Street Journal, saying the U.S. central bank could trigger a “catastrophic recession.”

“If the Fed cuts too much or too abruptly, the resulting recession will leave millions of people, especially low-wage workers and workers of color, with less pay or none at all,” Warren’s op-ed explainedmore

Moreover, despite criticism that the Federal Reserve has yet to halt the bank’s massive bond purchases and begin quantitative tightening (QT), the central bank said Wednesday that this is a priority.

“In addition, the Board will continue to reduce its holdings of Treasury securities and agency and agency-backed securities, as described in its plan to reduce the size of the Federal Reserve’s balance sheet issued in May,” the Fed statement concluded.

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