(NewsNation) — After a brief pause in June, the Federal Reserve raised interest rates once again Wednesday, pushing its benchmark lending rate to the highest level in 22 years.
The latest quarter-point increase — which raises rates to a range of 5.25% to 5.5% — marks the eleventh rate hike in the past 17 months as the central bank continues to battle inflation.
“We understand the hardship that high inflation is causing and we remain strongly committed to bringing inflation back down to our 2% goal,” Fed Chair Jerome Powell said at a press conference.
Wednesday’s increase wasn’t entirely unexpected but comes despite recent encouraging economic news. Inflation slowed to 3% in June compared with a year earlier and consumer confidence hit its highest level in two years this month.
Powell said economic indicators suggest the economy is growing at a “moderate pace,” a slight upgrade from last month’s assessment. He also pointed out that June’s inflation report, although welcome, was just one month’s data.
The Fed chair left the door open to future rate hikes but did not commit to a plan.
“Looking ahead we will continue to take a data-dependent approach in determining the extent of additional policy firming that may be appropriate,” Powell said.
Any additional rate hikes may depend on the labor market, which has remained resilient despite the Fed’s actions.
“We’ve seen some cracks in the labor market but we haven’t seen the labor market crash by any measure,” said Dan Roccato, a clinical professor of finance at the University of San Diego.
Roccato said low unemployment — which continues to sit near historic lows around 3.6% — and rising wages, suggest the labor market is still tight.
Economists have become less convinced a recession is coming, though a majority still believe a downturn is likely in the next 12 months.
Core inflation, which excludes food and energy costs, remained sticky in June and rose 4.8% compared with a year earlier. Growth in consumer spending has also slowed from earlier in the year.
Americans have seen mortgage rates, auto loans and credit cards get significantly more expensive since the Fed started raising rates back in March 2022. Wednesday’s announcement may push those costs even higher.
It’s a reminder that when it comes to crushing inflation, the Fed’s tactics and Americans’ wallets are often at odds, Roccato pointed out.
It remains to be seen whether the Fed will pull off the so-called “soft landing,” conquering inflation while avoiding a recession.
Last month, policymakers signaled that they expected two more increases. That means one more could be coming before the end of the year.
But Powell didn’t commit to an increase at the next meeting in September and told reporters Wednesday that the Fed will continue to make determinations meeting by meeting.