The Federal Reserve has continued its battle against inflation by raising the interest rate yet again. The interest rate is the highest now that it has been in 15 years.
The fight against inflation is not over despite some promising signs lately.
The Federal Open Market Committee voted to raise interest rates by half a percentage point. Interest rates now are between 4.25 and 4.5 percent.
That’s not all. With the increase came an indication that officials expect rates to remain high through next year. Reductions should not be anticipated until 2024.
This is the seventh time rates have gone up this year. This latest increase broke a string of four straight three-quarter point hikes, which marked the most aggressive policy moves since the early 1980s. Rates were at near zero percent in March.
Inflation is still near 40-year highs. In an effort to get inflation under control, the Fed has been raising interest rates throughout the year.
This time, the raise comes as the latest Consumer Price Index (CPI) report — which measures the average change in prices for a variety of goods and services over time — rose only 0.1% last month.
That’s the smallest annual inflation increase in nearly a year.
What can be expected next? The Fed said it will continue raising rates next year until inflation settles to 2 percent.
The news of the continuing rate hikes sent stocks sliding, which investors found aggressive given the small inflation increase. Economists worry that additional rate hikes could tip the economy into a recession.
Investors initially reacted negatively to the expectation that rates may stay higher for longer. Stocks gave up earlier gains.
The string of interest rate increases that the Fed has imposed this year has made borrowing costs higher for things like mortgages and credit cards.