The Federal Reserve has raised its benchmark interest rate by three-quarters of a point for a second straight time in an effort to tame high inflation.
As a result, the key rate, which affects many consumer and business loans, will jump to a range of 2.25% to 2.5%, its highest level since 2018.
Speaking at a news conference, Chair Jerome Powell said the Fed remains committed to defeating chronically high inflation.
“I do not think the U.S. is currently in a recession,” he said.
The decision follows a jump in inflation to 9.1%, the highest annual rate in 41 years. Fear of a recession have eroded consumer confidence and heightened anxiety about the economy. The average rate on a 30-year fixed mortgage has roughly doubled in the past year, to 5.5%.
At his news conference, Powell suggested that with the economy slowing, demand for workers easing modestly and wage growth possibly peaking, the economy is evolving in a way that should help reduce inflation.
“Are we seeing the slowdown in economic activity that we think we need?” he asked. “There’s some evidence that we are.”
“Recent indicators of spending and production have softened,” the Fed said in a statement. “Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”
The statement points to Russia’s war against Ukraine causing “tremendous human and economic hardship” and related events creating additional upward pressure on inflation and impacting global economic activity.
With a goal of achieving maximum employment and inflation at the rate of two percent over the longer run, the committee “anticipates that ongoing increases in the target range will be appropriate.”
“The committee is strongly committed to returning inflation to its two percent objective,” the statement concludes
Committee members consider a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.