The Federal Reserve stepped up its fight against a 40-year high in US inflation on Wednesday, announcing its fourth consecutive three-quarters of a percentage point hike in interest rates but signaling the pace of increases may soon slow. With the cost of living crisis battering consumers and Joe Biden’s political fortunes, Fed officials have now imposed six rate rises in a row, the sharpest increases in interest rates since the 1980s, when inflation touched 14% and rates rose to nearly 20%. The Fed chair, Jerome Powell, said there were “no grounds for complacency” but acknowledged that officials were considering the pace of rate rises as they assess their impact on the wider economy. “Even so, we still have some ways to go. And incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said. The Fed’s latest increase brings the federal funds rate – which acts as a benchmark for everything including business loans, credit card and mortgage rates – to between 3.75% and 4% after sitting at 0% for more than a year during the coronavirus pandemic. “I’m pleased that we have moved as fast as we have. I don’t think we’ve overtightened,” said Powell. He said the Fed would, at some point, slow the pace of rate rises but warned it was “very premature to think about pausing”. The central bank does not expect inflation or interest rates to reach the levels seen in the 80s. Powell has indicated that the Fed expects rates will reach 4.4% by the end of the year and start coming down until 2024. Fed officials had expected inflation to decline this year. But inflation – which the Fed initially dismissed as “transitory” – remains stubbornly high. In September, the costs of goods and services were 8.2% higher compared to a year ago, well above the Fed’s target inflation rate of 2%. Powell said the chances of the US economy achieving a “soft landing” and avoiding recession as it fights off inflation had “narrowed”. “We’ve always said it was going to be difficult. I think to the extent rates have to go higher and stay higher for longer, it becomes harder to see the path,” he said. The Fed’s move comes as governments around the world are struggling with a surging cost of living crisis. Soaring food prices have pushed inflation over 10% in the UK and on Thursday the Bank of England is expected to raise its base rate by as much as one percentage point to 3.25%. Last month, the European Central Bank also increased its cost of borrowing to tackle inflation, now at a record high of 10.7%. US stock markets rose as the Fed indicated that the pace of rate rises could start to taper but sank as Powell made clear that rates would continue to rise and could stay high for longer than the Fed had first indicated. The impact of rate rises takes time to filter through to the wider economy and while growth in the US housing market appears to be slowing, hiring has remained robust. It is expected to weaken as companies count the cost of higher borrowing. The labor department will release October’s jobs data on Friday with economists expecting the US to have added around 200,000 jobs over the month and unemployment to stay close to a 50-year low of 3.5%. On Wednesday ADP, the US’s largest payroll processing firm, reported private employers had added 239,000 positions in October, better than the 192,000 jobs added in September. But ADP warned November’s job gains were not widespread - the leisure and hospitality sector accounted for 210,000 of the jobs added - and there were signs of a slowdown in other industries. “This is a really strong number given the maturity of the economic recovery but the hiring was not broad-based,” ADP’s chief economist, Nela Richardson, said. “Goods producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains. While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.”