The Federal Reserve is raising its benchmark interest rate a quarter of a percentage point, officials with the central bank said on Wednesday, its eighth consecutive hike as policy makers try to subdue inflation.
The latest increase in the federal funds rate — what banks charge each other for short-term loans — is smaller than the Fed’s 0.5 percentage point increase in December as well as a string of three-quarter point moves over the course of 2022.
The move to ease the pace of monetary tightening, which economists and investors had widely expected, comes amid signs the U.S. economy is cooling off and concerns about a possible recession later this year.
With the latest increase, the Fed’s target interest rate is set in a range between 4.50% and 4.75% — its highest level since late 2007.
The Fed has been rapidly hiking rates since March of 2022 in a bid to snuff out persistent inflation. High interest rates slow the economy by making it more expensive for consumers and businesses to borrow money. However, policy makers worry that raising rates too high could tip the economy into a recession.
Inflation across the U.S. has fallen from a yearly rate of 9.1% this summer — its highest level in four decades — to a more modest 6.5% in December. But the Fed has signaled it wants inflation to fall closer to its 2% target before easing the pace of monetary tightening.
Federal Reserve Chairman Jerome Powell is scheduled to address the public at 2:30 p.m. Eastern time, when he will lay out his expectations for the economy.
This is a developing story.
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