Fed Raises Interest Rates Again
The Federal Reserve on Wednesday raised interest rates to their highest level in more than two decades, according to .
Whats going on: The central bank increased the target range for the federal funds rate by 25 basis points to 5.25% to 5.5%, the highest level since 2001.
Why its important: Though consumer prices have declined for 12 straight months, in June, consumer prices increased 3% year on year. Even though thats the lowest the annual inflation rate has been in more than two years, its still too high for the Fed, which is looking to wrestle increases down to about 2%.
- Supercore inflation, which excludes shelter, gas and food costs, has remained at the 4% annual ratefar too high for the Feds likingfor more than two years.
- The banks aim in raising interest rates is to make borrowing and investing costlier, reducing demand for labor, goods and services in the economy.
Recession revision: After Wednesdays interest rate announcement, [Federal Reserve Chairman Jerome Powell] affirmed the central bank no longer expects a recession to occur as a result of the increases, adding that it could bump up the key interest rate even further.
The challenge: U.S. workers are relying on the Fed to balanc[e] unemployment and inflation. The Fed believes it can slow the economy to reduce inflation without causing people to lose their jobs en masse.
