U.S. Fed Raises Rates By 25 Basis Points To 22-Year High, Signals It Isn't Done Yet
The FOMC increased the federal fund rates to 5.25-5.5%, and says it will continue to assess additional information.
The U.S. Federal Reserve raised the benchmark rates by another 25 basis points and kept the door open for more, saying that a future hike will be "data-dependent".
The Federal Open Market Committee raised the federal fund rates in the range of 5.25% to 5.5%, according to its statement on Wednesday. This marks the eleventh hike to come out of the Federal Reserve over the course of the last 12 policy meetings.
The central bank is no longer forecasting a recession, said Fed Chair Jerome Powell. While the FOMC will not stop raising rates before achieving the 2% target inflation, "we don't see inflation back at 2% until about 2025", he said.
The U.S. central bank had kept rates unchanged at its last meeting in June, but signalled that more hikes might be coming down the line.
Consumer price inflation in the United States had cooled to 3% as of June, according to numbers reported in July. Excluding volatile food and energy prices, the core CPI rose 4.8% from a year ago and 0.2% on a monthly basis.
The FOMC's decision on raising the rate by a quarter of a percentage point was unanimous, it said. "The Committee will continue to assess additional information and its implications for monetary policy."
In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will 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, the release said.
"It’s possible we raise or hold rates in September meeting, if data warrants," Powell said, adding that the FOMC is yet to see if the June inflation print will be replicated in the coming months.
U.S. stocks fell following the Fed’s decision to hike rates. The benchmark S&P 500 was down by 0.27% as of 2:08 p.m. EST. The Nasdaq composite also fell 0.31%.
Yields on 10-year U.S. bonds fell to 3.87% from Tuesday’s close of 3.88% at 2:11 p.m. EST after the decision.
