Yesterday, the Federal Reserve raised interest rates by half a percentage point, setting their policy rate at a range of 4.25 to 4.5 percent, the highest it has been since 2007.
The central bank’s newly raised rate was dialed back from the previous four three-quarter-point hikes, which was widely expected by economists as signs have emerged that inflation is beginning to cool.
Fed Chair Jerome Powell said recent reports showing inflation easing in October and November were “welcome.”
“The report is very much what we expected and hoped for,” he said in a new conference following the central bank’s announcement. But he added, “It will take substantially more evidence to provide confidence that inflation is on a sustained downward path.”
Related: When Will We Hit Peak Inflation?
Fed officials made it clear that they expect to do more to restrain the economy than previously expected. Interest rates are expected to rise 5.1% next year, officials projected, up from 4.6% when they last issues forecasts in September. “We have more work to do,” Jerome Powell said.
The next Fed decision will come February 1, 2023.
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