The US is facing a cost of living crisis with soaring inflation, with the latest rate hike being the seventh this year
The Federal Reserve lightly put the brakes on a high-speed rate hike Wednesday following news suggesting two years of runaway inflation may be slowing in the US.
After a two-day meeting, the Fed announced another half-point rate hike, its seventh hike this year but which followed four straight three-quarter-point rate hikes. The increase brought the Fed's benchmark interest rate – used for everything from setting interest rates on mortgages and loans to credit cards – into the 4.25% to 4.5% range, the highest level in 15 years.
Fed Chair Jerome Powell said: "After moving so quickly, and now having so much restraint still in progress, we think the right thing to do now is move to a slower pace."
Powell made it clear that there will be more rate hikes next year and the Fed expects inflation to remain high in 2023.
The central bank has been raising interest rates at a pace not seen in decades as it struggles to defuse a cost of living crisis that saw inflation rise to a four-decade high of 9.1% in June.
The Fed's announcement came after the US Bureau of Labor Statistics reported on Tuesday that the consumer price index figure – which measures a variety of goods and services – showed prices up 7.1% from last November, for a 0.1% increase from October.
The news was better than expected, prices rose by an annualized rate of 7.7% in October and the monthly gain was the lowest since last December. But the inflation rate is still three times higher than the Fed's target of 2% and Powell, said he hopes to keep interest rates higher for longer than he previously anticipated.
The Fed initially dismissed US inflation as "transient" and argued it would fade as coronavirus-related supply chain issues cleared up. It is now forecast that core inflation, which excludes volatile food and energy categories, will fall from 5% annualized in October to 3.5% late next year. That's higher than the 3% projection the Fed made in September.