MercoPress. South Atlantic News Agency

Fed raises benchmark rate to its highest since 2021, “getting inflation back to 2% has a long way to go”

“My colleagues and I are aware that high inflation imposes significant hardship as it erodes purchasing power,” Powell said in the press conference.

The United States Federal Reserve raised its benchmark lending rate on Wednesday by a quarter of a percentage point, the highest level since 2001 and the eleventh hike in its last 12 meetings.

Nevertheless, the Fed indicated that it could implement further increases in the future. Fed Chair Jerome Powell said that inflation in the US remains “well above” the central bank's target of 2%. “The process of getting inflation back down to 2% has a long way to go”.

“My colleagues and I are aware that high inflation imposes significant hardship as it erodes purchasing power,” Powell said in the press conference following the two day announcement.

“This, he insisted, was especially true for those least able to meet the higher costs of essentials such as food, housing and transportation,” thus the Fed will “continue to assess additional information and its implications for monetary policy.”

In effect, key measures on inflation remain more than double the 2% target set by the Fed. However, job gains remain “robust,” and the US economy was growing at a “moderate” pace, the Fed said.

Powell said that “we do have a shot” for inflation to return to the Fed's target without a substantial increase in unemployment.

The US government is expected to report this Thursday that the economy grew at a 1.8% annual pace, according to private estimates The Fed's chair said that the central bank's staff are “no longer forecasting a recession.”

“So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession,” Powell said.

The Fed had in its June policy meeting predicted a mild recession starting later in 2023.