US Fed hikes rates by 25 basis points to highest in 22 years

By Ovunc Kutlu

ISTANBUL (AA) - The US Federal Reserve raised its benchmark interest rate Wednesday by 25 basis points, carrying it to the highest level in more than 22 years.

The Federal Open Market Committee (FOMC) unanimously decided to raise the target range for the federal funds rate to between 5.25% and 5.5% -- its highest since early 2001.

"Recent indicators suggest that economic activity has been expanding at a moderate pace," the FOMC said in a statement. "Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated."

The Committee reiterated that the US banking system is "sound and resilient" amid a recent banking crisis.

"Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain," it added.

The central bank raised interest rates by a total of 425 points in seven hikes last year to fight record inflation that soared last June to its highest in more than 40 years.

It was followed by rate hikes of 25 basis points apiece Feb. 1, March 22 and May 3.

The Fed skipped a rate increase on June 6 to assess the implications of its monetary policy on the economy and inflation.

Annual consumer inflation in the US came in at 3% in June, marking its lowest in more than two years, easing sharply from 9.1% in June 2022.