The Federal Reserve raised short-term interest rates by a quarter of a percentage point on Wednesday, raising the benchmark interest rate to a new range of 4.50% to 4.75%. This is the highest since October 2007.
In a statement Wednesday, the central bank confirmed the slowdown in inflation as the Fed continues to assess the impact of rate hikes over the past year on consumer prices.
The 25 basis point rate hike shows the pace of rate hikes has slowed further after the Fed raised rates by 50 basis points in December and 75 basis points every four meetings from June to November.
“Inflation has eased somewhat, but remains elevated,” a Fed official confirmed in a statement on Wednesday. The Federal Reserve no longer points to Russia’s war in Ukraine as putting upward pressure on inflation but said the conflict is contributing to heightened global uncertainty. rice field.
At a press conference on Wednesday, Fed Chairman Jerome Powell was somewhat optimistic about the inflation outlook, saying:
“For the first time we can say that the disinflationary process has begun,” he said.
Those comments sent the stock higher on Wednesday.
In its policy statement, the Fed said that “sustained rate hikes” would likely be appropriate to adopt a “sufficiently restrictive” monetary policy stance. Government bond rates and other bonds.
The Fed has suggested that central banks will consider the delay in monetary policy and its impact on inflation, the economy, and financial markets when determining the “magnitude” of future rate hikes, rather than the pace.
Wednesday’s decision was unanimous, with all 12 of his members of the Federal Open Market Committee voting in favor of raising rates.
After hitting a 40-year high last spring, the latest inflation rate has eased over the past three months but is still well above the Fed’s 2% target. The Fed’s favorite inflation gauge, a measure of consumer spending excluding food and energy, rose 4.4% year-on-year in December, the slowest annual increase since October 2021, compared with 4.7% in November. bottom.
Meanwhile, the consumer price index, which excludes food and energy prices, rose 0.3% in December after rising 0.2% in November. Core CPI rose 5.7% year-over-year, up from 6% in November.
Separately, as is customary at the beginning of each year, the Fed reiterated its commitment to its long-term goals and monetary policy strategy of stable prices, maximum employment, and moderate long-term interest rates.