The Fed raised rates by a quarter percentage point from near zero, in what is expected to be the first in a series of raises in the coming months. JW Mason, associate professor of economics at John Jay College, said a quarter-point rate rise was unlikely to have much impact on inflation or the wider economy.
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The Fed has a dual mandate – to maximize employment and keep prices under control. The job market and the wider economy have made an impressive recovery, thanks in part to Fed rate cuts and a massive stimulus program, but prices have increased by 7.9% in the year through February – the highest rate of inflation in 40 years.
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Raising rates too quickly threatens to push the US into recession. This week, CNBC’s Fed Survey – which gauges the opinions of fund managers, strategists and economists – put the probability of recession in the US at 33% in the next 12 months, up 10% from the 1 February survey. The latest survey put the chance of a recession in Europe at 50%.