Once again interest rates rise and with it the credits

Stepping up its fight against inflation, the Federal Reserve (Fed) raised its key interest rate by three-quarters of a percentage point for the third time on Wednesday, signaling more hikes to come, an aggressive move that experts say will increase the risks of a eventual recession.

The Fed’s move raised its short-term benchmark rate — which hurts credit for many consumers and businesses — to a range of 3% to 3.25%, its highest level since early 2008.

The central bank’s board also forecast further hikes in its benchmark rate to around 4.4% by the end of the year, one percentage point higher than they had forecast as recently as last June. And they plan to raise the rate again next year, to about 4.6%, which would be its highest level since 2007.

By raising interest rates, the Fed makes it more expensive to take out a mortgage, car or business loan. For this reason, consumers and businesses presumably borrow less and spend less, which cools the economy and slows down inflation.

The fall in gasoline prices has slightly reduced headline inflation, which reached a still painful 8.3% in August compared to the previous year.

Fed Chairman Jerome Powell told a news conference that before central bank officials weigh whether to rein in interest rate increases, they would like to “be very confident that inflation is coming back” to his 2% goal. He noted that the strength of the labor market is driving wage increases that contribute to the growth of inflation.

In addition, he underlined his conviction that controlling inflation is essential to guarantee the health of the labor market in the long term.

“If we want to light the way to another period of such a strong job market, we have to put inflation behind us,” Powell said. “I wish there was a way to do it that didn’t cause pain, but there isn’t.”

Fed officials have said they seek to reduce inflation without causing widespread damage to the economy. However, most economists have expressed skepticism about it. They believe the Fed’s aggressive hikes will eventually result in job cuts, rising unemployment rates, and a full-scale recession this year or early next.