Fed Raises Interest Rate to Highest in More than 2 Decades

July 26, 2023

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.”

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