(ReclaimingAmerica.net) – The Federal Reserve has approved a widely anticipated new increase in interest rates that has brought the benchmark to its highest level in 22 years.
On Wednesday, the Federal Open Market Committee hiked its funds rate by 0.25 percentage points, bringing it to a target range of 5.25%-5.5%, whose midpoint is the borrowing costs benchmark’s highest value since January 2001.
The new move is the Fed’s 11th interest rate hike since March 2022, after in June, it put rate increases on hold, Newsmax reports. Economists expected the quarter-point growth as part of the Fed’s efforts to reduce inflation.
At a press conference on Wednesday, Fed Chairman Jerome Powell noted that inflation had been reigned in since last summer, but the 2% target “has a long way to go.”
According to CNBC, his words were a hint that there wouldn’t be another interest rate hike in September – contrary to the message from June’s meeting when the Fed said there were two upcoming increases.
“I would say it’s certainly possible that we will raise funds again at the September meeting if the data warranted,” Powell said.
“And I would also say it’s possible that we would choose to hold steady, and we’re going to be making careful assessments, as I said, meeting by meeting,” he added.
The Fed chief added the committee would be looking into “the totality of the incoming data” and inflation and economic activity impact.
The latest interest rate increase caused markets to take off initially, but the reactions were mixed towards the end of the day. The Dow Jones Industrial Average went up by 82 points, but Treasury yields went lower, and S&P 500 and Nasdaq Composite didn’t see much change.
“I suspect the Fed will raise rates a quarter of a point at the upcoming FOMC meeting and then wait a few months to see any lagged effects come in,” said Peter Earle, an economist at the American Institute for Economic Research.
“If disinflation continues at its current pace, with this rate hike we may be at the top of this cycle. If disinflation slows or the prices of certain goods/services prove sticky—like rents/shelter costs—we could see another 25 basis point hike in the late summer/early fall,” Earle predicted.