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US Fed unveils smaller rate hike but signals inflation fight not over

February 03, 2023 00:00:00


WASHINGTON, Feb 2 (AFP): America’s Federal Reserve slowed its pace of interest rate hikes Wednesday, tempering an aggressive campaign to rein in costs as inflation cools, but signaled the battle is not yet over.

The US central bank announced a quarter-point hike to the benchmark lending rate at the end of its two-day policy meeting, taking the rate to a target range of 4.50-4.75 percent.

“Inflation has eased somewhat but remains elevated,” said the Fed’s policy-setting Federal Open Market Committee (FOMC) in a statement.

While recent developments are encouraging, officials will need “substantially more evidence” to be confident that inflation is on a sustained downward path, Fed Chair Jerome Powell told a press briefing.

According to the FOMC statement, “the committee anticipates that ongoing increases in the target range will be appropriate” to bring inflation back to policymakers’ two percent target.

The Fed has cranked up interest rates eight times since March 2022, including four consecutive 0.75 percentage point increases, lifting borrowing costs in hopes of dampening demand.

The aim is to rein in inflation, which surged to its fastest pace in decades last year but has since come off a peak.

On Wednesday, the Fed acknowledged recent indicators “point to modest growth in spending and production” as economic activity eases.

The 0.25 percentage point rise marks a step down from December’s half-point hike and the series of bigger spikes last year.

But the FOMC statement suggests rate increases will continue.

Powell noted Wednesday that it will take a few more rate hikes to get to an “appropriately restrictive” policy level while inflation runs hot.


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