Federal Reserve hikes interest rates but at a slower pace as inflation cools

Though smaller than its previous hike, the latest move will likely further raise the costs of many consumer and business loans and the risk of a recession

The Federal Reserve extended its fight against high inflation Wednesday by raising its key interest rate by a quarter-point, its eighth hike since March. The Fed signaled that even though inflation is easing, it remains high enough to require further rate hikes.

The central bank’s latest move put its benchmark short-term rate in a range of 4.5% to 4.75%, its highest level in about 15 years. Though smaller than its previous hike — and even larger rate increases before that — the latest move will likely further raise the costs of many consumer and business loans and the risk of a recession.

In a statement, Fed officials repeated language they have used since March that says, “ongoing increases in the (interest rate) target range will be appropriate.” That is seen as a signal that they intend to raise their benchmark rate again when they next meet in March and perhaps in May as well.

The Fed’s hike was announced one day after the government reported that pay and benefits for America’s workers grew more slowly in the final three months of 2022, the third straight slowdown. That report could help reassure the Fed that wage gains won’t fuel higher inflation.