Fed raises key rate by half-point and signals more to come

WASHINGTON — The Federal Reserve reinforced its inflation fight Wednesday by raising its key interest rate for the seventh time this year and signaling more hikes to come. But the Fed announced a smaller hike than it had in its past four meetings at a time when inflation is showing signs of easing.

The Fed boosted its benchmark rate a half-point to a range of 4.25 percent to 4.5 percent, its highest level in 15 years. Though lower than its previous threequarter-point hikes, the latest move will further heighten the costs of many consumer and business loans and the risk of a recession.

The policymakers also forecast that their key shortterm rate will reach a range of 5 percent to 5.25 percent by the end of 2023. That suggests that the Fed is prepared to raise its benchmark rate by an additional three-quarters of a point and leave it there until the end of next year. Some economists had expected that the Fed would project only an additional half-point increase.

“The inflation data in October and November show a welcome reduction," Chair Jerome Powell said at a news conference. "But it will take substantially more evidence to give confidence that inflation is on a sustained downward path.”

The prospect of higherthan-expected borrowing rates disappointed Wall Street. Investors immediately sent stock prices falling.

The latest rate hike was announced one day after an encouraging report showed that inflation in the United

States slowed in November for a fifth straight month. The year-over-year increase of 7.1 percent, though still high, was sharply below a recent peak of 9.1 percent in June.

In its updated forecasts, the Fed's policymakers predicted slower growth and higher unemployment for next year and 2024.