In its continuous effort to combat inflation, the Federal Reserve increased its benchmark interest rate by another quarter of a percentage point on Wednesday.
The rate-setting division of the Fed announced that it would increase its benchmark rate to a range between 5% and 5.25%, which would be the highest level since 2007. In what has been the most aggressive rate-hiking cycle since the 1980s, the increase represents the 10th consecutive increase in interest rates since last March.
However, the Fed also hinted that it might now halt its 10-hike rate streak, which has steadily increased the cost of borrowing for both consumers and businesses.
“The Committee seeks to achieve maximum employment and inflation at a rate of 2 percent over the long run.” In support of these goals, the Committee decided to raise the target range for the federal funds rate to 5 to 5-1/4 percent.” The FOMC statement issued by the Federal Reserve said
“The Committee will closely monitor incoming information and assess the implications for monetary policy. In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.”
In addition to the Fed, other significant central banks are also limiting lending as of Wednesday. Christine Lagarde, president of the European Central Bank, is expected to announce another interest rate increase on Thursday after inflation data released on Tuesday indicated that price increases picked up last month.
Following a 6.9% year-over-year increase in March, consumer prices in the 20 nations that use the euro increased by 7% in April.