The Federal Reserve increased its benchmark interest rate on Wednesday to the highest level in 15 years, emphasizing that despite recent encouraging signals, the struggle against inflation is still ongoing.
According to CNBC, the Federal Open Market Committee (FOMC), which sets interest rates, decided to raise the overnight borrowing rate by half a percentage point, bringing it to the desired range of 4.25% to 4.5%. The rise ended a run of four consecutive increases of three-quarters of a cent, the most aggressive policy changes since the early 1980s.
The increase came with hints that rates will remain higher through the next year, with no decreases until 2024. The FOMC’s “dot plot” showing individual members’ estimates, the predicted “terminal rate,” or the point at which policymakers anticipate ending the rate rises, was set at 5.1%.
Chairman Jerome Powell stated during a press conference that it was critical to continue the fight against inflation to prevent the expectation of increased prices from becoming entrenched. He explained, “Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to have confidence that inflation is on a sustained downward path.”
