Key issue as Fed meets this week: When to slow rate hikes?

WASHINGTON (AP) — The Federal Reserve may reach a turning point this week as it announces what's expected to be another substantial three-quarter-point hike in its key interest rate — its fourth straight.

Fed officials will likely engage in a fraught debate over whether it may soon be time to slow its rate hikes, which are intended to cool the worst inflation in four decades but are also raising the risk of a recession.

At a news conference Wednesday after the Fed's latest meeting, Chair Jerome Powell could signal a forthcoming shift to smaller rate increases. Doing so would give officials time to assess the impact of the hikes.

Powell won't explicitly spell out the Fed's likely next moves. But economists say he could acknowledge that officials are discussing a downshift to a half-point rate increase in December. The Fed's hikes have already led to much costlier borrowing rates, ranging from mortgages to auto and business loans.

Those higher loan costs have weakened the home market, in particular. The average rate on a 30-year fixed-rate mortgage, which was just 3.14% a year ago, topped 7% last week for the first time since 2002, mortgage buyer Freddie Mac reported. Sales of existing homes have fallen for eight straight months.

Fed officials have stressed that they need to raise rates significantly to tame inflation, which has caused hardships for millions of households. High inflation has also become a central point of attack for Republicans against Democrats in the midterm congressional elections.

Yet some economists have said the Fed should soon consider scaling back the fastest pace of rate increases since the early 1980s.

“It is time to think about calibrating these rate hikes,” said Diane Swonk, chief economist at KPMG. As the Fed moves closer to finishing its...