FED raises US interest rates to highest level in 22 years

The quarter-percentage point hike brings the target range for the federal funds rate to 5.25% to 5.5%, following a pause in the rate-rising cycle last month.

The FED's statement emphasized its commitment to achieving maximum employment and stabilizing inflation at the desired rate of 2% over the longer term. With this goal in mind, the Committee decided on the rate increase to address the current economic challenges.

Considering the broader economic landscape, the Committee will carefully assess the impact of cumulative monetary policy tightening, the time lags for policy effects on economic activity and inflation, as well as relevant economic and financial developments in determining the extent of further policy adjustments required to restore inflation to the target rate.

As of now, US inflation has shown a notable decline for twelve consecutive months, currently running at an annual rate of 3%, down from the peak of over 9% recorded in June of the previous year. To combat this surge in prices and maintain economic stability, the Federal Reserve has implemented a series of rate hikes, moving away from near-zero rates.

Despite the unprecedented 11 rate increases, the US economy continues to exhibit resilience, demonstrating its strength even during the most aggressive rate-rising cycle witnessed in 40 years. Although hiring has somewhat slowed, employment remains robust, with the unemployment rate hovering near a record low.

The Federal Reserve's latest move is part of its strategic efforts to manage inflationary pressures and ensure economic prosperity in the face of evolving challenges. The Fed's decision will have a ripple effect throughout the economy. Higher interest rates will make it more expensive to borrow money, which could slow down economic growth. However, it could also help to bring down inflation.

The Fed will continue to monitor inflation and economic conditions in the coming months. It is possible that the central bank will raise rates again in the future. (ILKHA)