The Fed approved a 0.25% hike, raising the easing rate again

The Federal Reserve said on Wednesday it raised the short-term borrowing rate by another 0.25%, the central bank’s second consecutive decision to slow interest rate increases while making efforts to cool the economy and return inflation.

The Fed has rolled out a series of increases in the cost of borrowing as it tries to slow rising prices by slowing the economy and stifling demand. However, this approach risks tipping the US economy into recession and putting millions out of work.

The Fed’s decision comes weeks after a government report showed that inflation slowed in December, marking six consecutive months of easing in prices.

At a press conference on Wednesday, Federal Reserve Chairman Jerome Powell vowed to continue fighting inflation. While acknowledging that inflation has eased in recent months, he said that inflation is still very high and that interest rates will need to remain high to bring inflation down to normal levels.

“Without price stability, the economy works for no one,” Powell said. “We will need significantly more evidence to be confident that inflation is on a sustainable downward trajectory.”

“We will continue the course until the job is done,” he added.

In a statement, the Fed said it remains “very attentive to inflation risks,” adding that the benchmark interest rate would require “continued increases” to bring inflation down to normal levels.

At a meeting in December, the Fed raised the short-term borrowing rate by half a percentage point, reversing three consecutive increases of 0.75% and signaling confidence that high inflation can be brought down to normal levels.

The Fed matched economists’ expectations for a 0.25% rate hike on Wednesday.

Consumer prices rose 6.5% over the year through December, which is a significant slowdown from the summer peak, but still more than three times the Fed’s inflation target of 2%.

The central bank said in a statement on Wednesday that the Fed remains “firmly committed to returning inflation to its 2% target.”

Low inflation led to optimism that the US economy might avoid a recession. In a report released on Monday, the International Monetary Fund predicted that US economic growth will slow this year but that the US could still avoid a downturn.

Moreover, government data last week showed that the US economy grew strongly at the end of last year, defying concerns about an impending recession.

However, most economists expect a recession later this year as interest rate increases weigh on the economy, according to a survey published by Bloomberg last week. The survey found that forecasters expect GDP to decline during the second and third quarters of this year.

Increasing evidence suggests that the Fed’s rate hike has halted some economic activity.

Home sales fell for the 11th consecutive month in December, reaching their lowest level since November 2010, according to the National Association of Realtors.

Meanwhile, US retail sales slumped in December, ending the usually busy shopping season with a whimper. Year-over-year retail sales fell about 1% last month, extending a decline roughly the same as in November.

However, the labor market has so far proven resilient, boosting the hopes of policymakers seeking to cool prices without causing huge job losses.

In December, employers added 233,000 jobs and wages grew by 4.6% compared to the previous year.

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