The benchmark rate is now at its highest level since the financial crash of 2008-09
The Federal Reserve has announced a further 25-basis-point interest rate hike at the conclusion of its latest policy meeting, an 11th increase in 12 decisions that could mark its last for some time.
That move, which comes as no surprise to markets and investors, sees the central bank’s benchmark rate hit a range of 5.25% to 5.50%, hovering around its highest level since the global financial meltdown of 2008-09.
The hike arrives amid some signs that the US economy is still ticking along at a faster pace than the Fed would prefer. The unemployment rate has remained resolutely low throughout its spate of rate jumps over the last year, currently sitting at a level of 3.6%, while inflation – despite easing – is still above the Fed’s target rate of 2%.
Still, there was a sense in the build-up to today’s announcement that a possible July rate hike would be the last, with interest rates having already spiked throughout the Fed’s aggressive approach of the last 16 months.
US consumers’ 12-month inflation expectations are now at their lowest level since November 2020 – and new data on the personal consumption expenditures price index, the Fed’s preferred inflation measure, is expected to show significant moderation when released on Friday.
The overall inflation rate, which dropped to 3% in June, has fallen at a steady pace since hitting a high of 9.1% in the same month last year, a sign that the Fed’s warlike policy on interest rates has been having its desired effect.
The Fed is next scheduled to meet on September 19-20, eight weeks from today, with the central bank expected to assess a wide range of economic data on jobs, inflation, and economic growth as it weighs up whether a fall pause on rate hikes is possible.
