The Federal Reserve raises interest rates by 0.50% at its last meeting of 2022

The Federal Reserve raised short-term interest rates by half a percentage point on Wednesday, slowing the pace of rate hikes after this summer’s torrid clip.

The rate hike brings the Fed’s policy rate, the federal funds rate, to a new range of 4.25%-4.5%, the highest level since December 2007.

Wednesday’s 50 basis point rate hike comes after the Fed raised rates by 75 basis points at each of its past four policy meetings — its most aggressive move since the 1980s.

“Recent indicators point to modest growth in spending and output,” the Fed said in its statement. “Job growth has been robust in recent months and the unemployment rate has remained low. Inflation remains high, reflecting supply and demand imbalances caused by the pandemic, higher food and energy prices and broader price pressures.”

The central bank also left wording in its statement saying it expects “continuous increases” in interest rates, implying that the Fed has no intention of pausing rate hikes anytime soon.

“The Committee expects that sustained increases in the target range will be appropriate to conduct monetary policy sufficiently restrictive to reduce inflation to 2 percent over time,” the Fed statement said.

New economic forecasts from the Fed released Wednesday show officials now seeing benchmark interest rates peak at 5.1% in 2023, 50 basis points more than the previously expected 4.6% in September.

Officials then see rates fall to 4.1% in 2024, slightly higher than previously expected.

These projections come after Fed Chairman Powell said at the previous meeting that interest rates will need to move higher in September than previous projections.

Seven civil servants see rates rise more than 5% next year – five cluster around 5.25% and two see rates rise to 5.6% next year.

Officials don’t see core inflation approaching target again until 2024, with inflation rounding to 4.8% this year before falling to 3.5% next year and 2.5% in 2024.

Officials see unemployment rising to 4.6% next year and staying at that level until 2024. The Fed sees below-average economic growth, with the economy barely growing at just 0.5% next year, before rising slightly to 1.6% in 2024.

The Fed’s move comes as inflation has begun to show signs of slowing over the past two months, after hitting a 40-year high this spring. The consumer price index, excluding the more volatile food and energy components, rose 0.2% month-on-month in November, up from 0.3% in October and 0.6% in September and August.

The vote was unanimous.

Federal Reserve Board Chairman Jerome Powell holds a press conference after Powell announced that the Fed has raised interest rates by three-quarters of a percentage point as part of its ongoing effort to fight inflation, following the Federal Open Market Committee meeting on interest rate policy in Washington.  USA, November 2, 2022. REUTERS/Elizabeth Frantz

Federal Reserve Board Chairman Jerome Powell holds a press conference after Powell announced that the Fed has raised interest rates by three-quarters of a percentage point as part of its ongoing effort to fight inflation, following the Federal Open Market Committee meeting on interest rate policy in Washington. USA, November 2, 2022. REUTERS/Elizabeth Frantz

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