Fed moves toward another big rate increase as inflation lingers

The Federal Reserve, determined to choke off rapid inflation before it becomes a permanent feature of the American economy, is steering toward another three-quarter-point interest rate increase later this month even as the economy shows early signs of slowing and recession fears mount.

Economic data suggests that the United States could be headed for a rough road: Consumer confidence has plummeted, the economy could post two straight quarters of negative growth, new factory orders have sagged, and oil and gas commodity prices have dipped sharply lower this week as investors fear an impending downturn.

But that weakening is unlikely to dissuade central bankers. Some degree of economic slowdown would be welcome news for the Fed, which is actively trying to cool the economy.

Inflation measures are running at or near the fastest pace in four decades, and the job market, while moderating somewhat, remains unusually strong. Fed policymakers are likely to focus on those factors as they head into their July meeting, especially because their policy interest rate — which guides how expensive it is to borrow money — is still low enough that it is likely spurring economic activity rather than subtracting from it.

Minutes from the Fed’s June meeting, released Wednesday, made it clear that officials are eager to move rates up to a point where they are weighing on growth.

The central bank will announce its next rate decision July 27, and several key data points are set for release between now and then, including the latest jobs numbers for June and updated consumer price index inflation figures — so the size of the move is not set in stone. But assuming the economy remains strong, inflation remains high and glimmers of moderation remain far from conclusive, a big rate move may well be in store.

Fed Chair Jerome Powell has said that central bankers will debate between a 0.5- or 0.75-percentage-point increase at the coming gathering.

Part of the amped-up urgency may stem from a recognition that the Fed is behind the curve and trying to fight inflation when interest rates, while rising quickly, remain relatively low, economists said.

“It is starting to look like .75 is the number,” said Michael Feroli, chief U.S. economist at JPMorgan Chase.

This article originally appeared in The New York Times.