The Federal Reserve on Wednesday hiked a key interest rate by a quarter of a percentage point to its highest level in 22 years.
Following the Central Bank’s two-day policy meeting, it announced the Fed’s target rate would rise to between 5.25% and 5.5%.
Analysts had raised questions earlier this month whether the Fed would undertake another interest rate hike after inflation had cooled for a 12th straight month in June, which had not been preceded by a rate hike.
However, a number of Federal Reserve officials had stated at the time that an additional interest rate increase would likely be necessary to bring inflation back to the Central Bank’s goal of 2%.
Inflation across the U.S. is currently just half the level it was a year ago, with prices rising at a roughly 3% annual rate.
But noting that core inflation, which does not include food and fuel prices, is well above the 2% target, the Fed’s rate-setting body on Wednesday left the window open for possible additional rate hikes, saying its future decision-making would “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
