US Federal Reserve on Wednesday (December 14) increased benchmark lending rate by half percentage point as it appeared to moderate its all-out campaign to cool US inflation.
America’s central bank has taken aggressive moves to ease demand in the world’s biggest economy, hiking rates seven times this year with interest-sensitive sectors like housing already reeling from tightening policy.
The latest increase has taken the benchmark rate to 4.25-4.50 per cent. This is highest since 2007.
But officials signaled that their battle to cool the US economy is not yet over.
“The committee anticipates that ongoing increases in the target range will be appropriate” to reach a stance restrictive enough to rein in inflation, said a statement by the Fed’s policy-setting Federal Open Market Committee (FOMC).
The committee anticipates its interest rate will end up higher than earlier projected next year.
On Wednesday, policymakers also downgraded their forecast for US economic growth in 2023 to 0.5 percent, narrowly avoiding a contraction, and see inflation rising more than anticipated.
While it takes time for policy effects to ripple through sectors, there have been positive signs, with consumer inflation in the United States easing in November.
The consumer price index, a key gauge of inflation, logged its smallest annual increase in nearly a year, fueling optimism that the Fed could soon moderate its efforts.
(With inputs from agencies)
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