As inflation lingers, Fed eyes repeat of rate hike

WASHINGTON — 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 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 consecutive 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 amid high inflation.

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.

The 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.

Fed Chairman Jerome Powell has said that central bankers will debate an increase of 0.5 to and 0.75 percentage points at the coming gathering, and will announce their decision July 27.