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The Federal Reserve raised interest rates by 0.25% on Wednesday (July 26), bringing the key rate to a range of 5.25% to 5.5%, which is the highest level in 22 years. It is the eleventh hike since March 2022.
While inflation has been cooling, consumer prices still increased by three percent year-over-year in June. That is the lowest increase in the past two years but still higher than the Fed's goal of two percent annual inflation.
"Inflation remains stubbornly high," said Greg McBride, senior vice president and chief financial analyst for Bankrate. "The economy has been remarkably resilient, the labor market is still robust, but that may be contributing to the stubbornly high inflation," he said. "So, Fed has to pump the brakes a bit more."
The Federal Reserve's Open Market Committee hinted that additional increases may be necessary in the coming months.
"In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," the Fed's statement said.