Federal Reserve announces small interest rate hike as inflation appears to slow

Entrance to the Federal Reserve headquarters.
(Image credit: Samuel Corum/Bloomberg via Getty Images)

The Federal Reserve announced Wednesday it was raising interest rates by 0.25 percent, the latest in a series of ongoing rate hikes aimed at slowing inflation.

"Ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time," the Federal Reserve said in a statement.

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Given the rising inflation seen over the last year, the Federal Reserve has been on a consistent push to increase interest rates since last March. However, Bloomberg noted that, as there begin to be signs of flatlining inflation, the small 0.25 hike is an indicator that the Federal Reserve is ready to "slow its inflation-fighting campaign without signaling a readiness to stop.

Bloomberg's financial index noted monetary problems in the U.S. have slowed to their tiniest impact in a year, as indicated by declining mortgage rates that have fallen from 7.08 percent back to 6.13 percent. Additional factors such as rising commodity prices and a weakening U.S. dollar have contributed to optimism about the economy.

However, despite the potential decline of inflation, experts said the Federal Reserve needed to maintain caution when tapering off rate hikes.

"Passing peak inflation is welcome and policymakers appear to have increased confidence that inflation is on a downward path," analysts at Bank of America wrote, per NBC News. "But the Fed is not yet convinced that inflationary pressures will dissipate quickly."

Justin Klawans, The Week US

Justin Klawans has worked as a staff writer at The Week since 2022. He began his career covering local news before joining Newsweek as a breaking news reporter, where he wrote about politics, national and global affairs, business, crime, sports, film, television and other news. Justin has also freelanced for outlets including Collider and United Press International.