HomeBusiness NewsFederal Reserve expected to escalate inflation fight for final timeFederal Reserve expected to escalate inflation fight for final timeWed, July 26, 2023 by ABC NewsSHARE NOW Bloomberg Creative/Getty Images(WASHINGTON) — The Federal Reserve on Wednesday will decide whether to revive an aggressive series of interest rate hikes and may indicate a willingness to soon end its full-throttle inflation fight.Last month, the central bank left its benchmark interest rate unchanged, ending a string of 10 consecutive rate increases that stretched back 15 months.Economists surveyed by Bloomberg this month expect the Fed to impose a modest quarter-point rate hike on Wednesday. However, economists said they expect the move to be the last rate increase of the current inflation battle.For more than a year, the Federal Reserve has aimed to roll back price increases by slowing down the economy and slashing consumer demand. The approach, however, risks tipping the economy into a recession.Inflation has fallen significantly from a peak last summer, but remains at a level one percentage point higher than the Federal Reserve’s target of 2%.Meanwhile, the rate hikes appear to have slowed but not imperiled the nation’s economic growth.Some key economic indicators have sustained robust performance. A jobs report earlier this month showed that the labor market cooled, but still grew at a solid clip in June, adding 209,000 jobs.“The U.S. economy has actually been quite resilient,” Fed Chair Jerome Powell said late last month in Sentra, Portugal, at a conference organized by the European Central Bank.A day later, a major upward revision of government data showed that gross domestic product increased at a 2% annualized rate for a three-month period ending in March — a sizable jump from the previous estimate of 1.3%.Despite the upward revision, U.S. economic growth over the first three months of this year was slower than the 2.6% growth in the previous quarter. In turn, that performance was down from 3.2% growth in the previous quarter.The cooldown of inflation alongside resilient economic performance has given rise to optimism among some observers that the U.S. will avert a recession.Nearly three-quarters of forecasters surveyed by the National Association for Business Economics said the probability of the U.S. entering a recession in the next 12 months is 50% or less, the organization announced on Monday.Speaking late last month, Powell expressed cautious optimism that the U.S. could avoid a severe recession, citing a modest slowdown of wage growth in recent months.As part of its inflation fight, the Fed closely watches the pace of wage growth, since in theory employers raise prices to keep up with higher pay.“We’re getting the softening we need,” Powell said. “We’re getting it slower than expected but it’s nonetheless happening. In my view, the least unlikely case is that we do find a way to better balance without a severe downturn.”Copyright © 2023, ABC Audio. All rights reserved.