U.S. Fed Raises Interest Rate By A Low 0.25 Point

The US Federal Reserve on Wednesday, Feb. 1, 2023, approved another hike in its benchmark interest rate, but at a slower pace of 0.25 percentage point, with the suggestion that "ongoing increases" will be needed to battle persistent inflation, Kyodo News reported.

Photo Insert: The eighth hike of the current cycle marks a return to the more orthodox approach of changing the rate in 0.25 percentage point increments.

The decision lifts the federal funds rate, which banks charge each other for overnight borrowing, to a new target range of 4.50 to 4.75 percent.

While the short-term rate is the highest since September 2007, the latest increase, announced after a two-day meeting of the policy-setting Federal Open Market Committee (FOMC), represents the smallest incremental move since March last year, when the US central bank began its current tightening cycle in a bid to tame surging prices.

"Inflation has eased somewhat but remains elevated," the committee said in a statement, adding it is "highly attentive to inflation risks" as Russia's war on Ukraine is "causing tremendous human and economic hardship and is contributing to elevated global uncertainty," Mainichi Shimbun also reported.

In its December 2022 meeting, Fed decided on an increase of half a percentage point, ending a run of four 0.75-point rises. The eighth hike of the current cycle marks a return to the more orthodox approach of changing the rate in 0.25 percentage point increments.

It comes amid signs that inflation may have begun to peak in the US. The Commerce Department said last week that year-on-year consumer price growth in December cooled to 5%, the lowest level since September 2021.

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