The US Federal Reserve on Wednesday raised interest rate by half a percentage point, which was less than the three-fourths on previous four occasions, in a sign that it feels the measures are working and the battle against inflation is not over.
This was the seventh rate hike in 2022 by the Fed in an unprecedented set of measures to reign in inflation.
These harsh measures, which have the effect of curbing spending which slows down production, had, it was feared, could trigger a recession.
More rate hikes are expected.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the Fed said in a statement at the end of a two-day meeting of its top policy body.
“Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are contributing to upward pressure on inflation and are weighing on global economic activity,” it added.
The Fed expects inflation to be 5.6 per cent at the end of the year and fall to 3.1 per cent in 2023.
Fed chair Jerome Powell is expected to hold a news briefing in a while.