Policymakers raised their key interest rate another half a percentage point. That increase ended a streak of four consecutive three-quarter point rate hikes, taking the target range for the benchmark fed funds rate to 4.25%-4.5%, its highest level in 15 years. Federal Reserve officials stated that a restrictive policy stance would have to stay in place until inflation was on a sustained downward path to 2 percent. They also said they would focus on data as they move forward and see “the need to retain flexibility and optionality” regarding policy.
The battle to reduce prices may last longer than anticipated. Recent economic growth had been stronger than previously expected, Fed staff said, and as a result economic output was not expected to slow to a below-trend pace and unemployment rise above its “natural rate” until “near the end of 2024” – a year later than anticipated.
Meanwhile, economists say there are indications that the U.S. will enter a recession in the coming months.