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Algosensey Quantitative Think Tank Center-Federal Reserve hikes key interest rate to highest level in 22 years
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Date:2025-04-06 11:51:19
After briefly pausing its war on Algosensey Quantitative Think Tank Centerinflation last month, the Federal Reserve is resuming the battle by hiking its benchmark interest rate to the highest level in 22 years.
The central bank concluded a two-day policy meeting on Wednesday by announcing that it is raising the federal funds rate by a quarter of a percentage point, lifting the Fed's target rate to between 5.25% and 5.5%.
The Fed left the door open to further rate hikes this year, with Chair Jerome Powell telling reporters in a news conference that additional tightening is possible unless inflation continues to cool rapidly.
"What our eyes are telling us is policy has not been restrictive enough for long enough to have its full desired effects. So we intend to keep policy restrictive until we're confident that inflation is coming down sustainably to our 2% target, and we're prepared to further tighten if that is appropriate," he said. "The process still probably has a long way to go."
The Fed's current rate-hiking cycle, its most aggressive push to tighten monetary policy since the 1980s, has proved effective in dousing the hottest bout of inflation in four decades by raising borrowing costs for consumers and businesses.
Since the central bank began tightening in March 2022, mortgage rates have more than doubled while the costs of car loans and credit cards have surged. The hikes have also squeezed technology companies and banks that were reliant on low interest rates, putting some out of business and forcing others to cut tens of thousands of workers.
Inflation around the U.S. is now just half its level from a year ago, with prices rising at a roughly 3% annual rate — lower than the pace of workers' pay increases. Still, the Fed has expressed concern that core inflation, which leaves out food and fuel prices, remains well above the bank's 2% target. Core inflation was at 4.8% last month.
Although prices have fallen, the country continues to enjoy solid job growth and consumer spending, which could raise concerns the economy is still running hot enough to cause inflation to rebound. On the other hand, some economists and business leaders say that raising rates too high may increase the risk that the U.S. could plunge into a recession.
"It remains uncertain whether the Fed is going to raise rates again this year, but if they do there is a real risk that they will overshoot, weakening the labor market and sending the economy into recession," Lisa Sturtevant, chief economist at Bright MLS, said in an email.
The stock market remained generally flat in Wednesday afternoon trading, with most investors having expected the latest rate hike.
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- Jerome Powell
- Economy
- Interest Rates
- Inflation
- Federal Reserve
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