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  • By The Financial District

Fed Raises Key Rate By Half-Point, Signals More Hikes Are Coming

The Federal Reserve reinforced its inflation fight Wednesday (early Thursday, Dec. 15, 2022, in Manila) by raising its key interest rate for the seventh time this year and signaling more hikes to come.


Photo Insert: A meeting of the Board of Governors of the US Federal Reserve



But it announced a smaller hike than it had in its past four meetings at a time as inflation shows signs of easing, Christopher Rugaber and David McHugh reported for the Associated Press (AP).


The Fed made clear, in a statement and a news conference by Chairperson Jerome Powell, that it thinks sharply higher rates are still needed to fully tame the worst inflation bout to strike the economy in four decades.



The central bank boosted its benchmark rate a half-point to a range of 4.25% to 4.5%, its highest level in 15 years. Though lower than its previous three-quarter-point hikes, the latest move will further increase the costs of many consumer and business loans and the risk of a recession.


More surprisingly, the policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023.


All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

That suggests that the Fed is poised to raise its rate by an additional three-quarters of a point and leave it there through next year. Some economists had expected that the Fed would project only an additional half-point increase.


The latest rate hike was announced one day after an encouraging report showed that inflation in the US slowed in November for a fifth straight month. The year-over-year increase of 7.1%, though still high, was sharply below a recent peak of 9.1% in June.


Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

“The inflation data in October and November show a welcome reduction,” Powell said at his news conference. “But it will take substantially more evidence to give confidence that inflation is on a sustained downward path.”



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