US Federal Reserve lifts interest rate and signals more hikes ahead
Published:Wednesday | February 1, 2023 | 4:04 PM
WASHINGTON (AP) — The US Federal Reserve extended its fight against high inflation Wednesday by raising its key interest rate by a quarter-point, its eighth hike since March.
And the Fed signalled that even though inflation is easing, it remains high enough to require further rate hikes.
At the same time, Chair Jerome Powell said at a news conference that the Fed recognises that the pace of inflation has eased — a signal that it could be nearing the end of its rate hikes. The stock and bond markets rallied during his news conference, suggesting that they anticipate a forthcoming pause in the Fed's credit tightening.
The Fed's latest move, though smaller than its previous hike — and even larger rate increases before that — will likely further raise the costs of many consumer and business loans and the risk of a recession.
In a statement, Fed officials repeated language they've used before that says, “ongoing increases in the (interest rate) target range will be appropriate.”
That is widely interpreted to mean they will raise their benchmark rate again when they next meet in March and perhaps in May as well.
The Fed's hike was announced a day after the government said pay and benefits for America's workers grew more slowly in the final three months of 2022, the third straight slowdown.
That report could help reassure the Fed that wage gains won't accelerate inflation.
Though the Fed kept the language in its statement Wednesday suggesting that more rate hikes are in store, it did note for the first time that price pressures are cooling.
The statement also hinted that it will likely stick with modest quarter-point hikes in coming months and is considering when to eventually suspend them altogether.
Powell stressed that the Fed's inflation fight is far from over.
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