Fed wields smaller hike
America's Federal Reserve slowed its pace of interest rate hikes on Wednesday, tempering an aggressive campaign to rein in costs as inflation cools while signalling the battle is not yet over.
The US central bank announced a quarter-point hike to the benchmark lending rate at the end of its two-day policy meeting, taking the rate to a target range of 4.50-4.75 per cent. “Inflation has eased somewhat but remains elevated,”
said the Fed's policysetting Federal Open Market Committee in a statement.
“The committee anticipates that ongoing increases in the target range will be appropriate” to bring inflation back to policymakers' 2 per cent target over time, the statement said.
The Fed has cranked up interest rates eight times since March 2022, including four consecutive 0.75 percentage point increases, lifting borrowing costs in hopes of dampening demand.
The aim is to rein in inflation, which surged to its fastest pace in decades last year but has since come off a peak.
On Wednesday, the Fed acknowledged that recent indicators “point to modest growth in spending and production” as economic activity eases. The 0.25 percentage point rise marks a step down from December's half-point hike and the series of bigger spikes last year.
But the FOMC statement suggests that rate increases will continue. It stressed that officials are “highly attentive to inflation risks” amid fallout from Russia's war against Ukraine, which is contributing to greater global uncertainty.
The Fed will want “concrete evidence that they've killed inflation, and they haven't yet”, said Ryan Sweet, chief US economist at Oxford Economics.