Federal Reserve poised to raise interest rates

Federal Reserve poised to raise interest rates again


The Federal Reserve raised its key interest rate another quarter of a percentage point on Wednesday in its ongoing bid to crush inflation, but indicated it could pause the increases to assess the impact of monetary tightening on the U.S. economy.

The Fed’s rate-setting body said it would raise its benchmark rate to a range between 5% and 5.25%, the highest level since 2007. The increase is the 10th straight interest-rate hike since last March in what has been the most aggressive rate-hiking regime since the 1980s.

Higher interest rates act on inflation by making it more expensive for businesses and consumers to borrow money, slowing economic activity. Many economists have been calling on the Fed to pause its current rate-hiking regime to avoid pushing the economy into a recession and, more recently, raising pressure on the banking sector.

In its statement issued Wednesday, the Federal Open Markets Committee signaled this could be the last increase, deleting a reference to “future increases” that appeared in prior statements and noting that “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation.”

“The Fed is no longer flagging that further hikes should clearly be expected, but this falls short of a strong commitment to ‘pause’ on rate hikes,” Brian Coulton, chief economist at Fitch, said in a note. “They are still talking about how they will determine the ‘extent’ of additional policy firming — not whether additional tightening is needed or not. The ongoing tightening of credit conditions is recognized, but they have still raised rates today and have left the window open for future hikes.”

Fed Chair Jerome Powell is set to address reporters at 2:30 p.m. Eastern time, when he will lay out his latest outlook for the economy.

This is a developing story.

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