Fed raises interest rates half a point to highest level in 15 years

The Federal Reserve on Wednesday raised its benchmark interest rate to the highest level in 15 years, indicating that the fight against inflation is not over despite some promising signs lately.

Keeping with expectations, the rate-setting Federal Open Market Committee voted to boost the overnight borrowing rate half a percentage point, taking it to a targeted range between 4.25% and 4.5%. The increase broke a string of four straight three-quarter point hikes, the most aggressive policy moves since the early 1980s.

Along with the increase came an indication that officials expect to keep rates higher through next year, with no reductions until 2024. The expected “terminal rate,” or point where officials expect to end the rate hikes, was put at 5.1%, according to the FOMC’s “dot plot” of individual members’ expectations.

Investors reacted negatively to the expectation that rates may stay higher for longer, and stocks gave up earlier gains. During a press conference, Chairman Jerome Powell said it was important to keep up the fight against inflation so that the expectation of higher prices does not become entrenched.