Fed hikes interest rates .25%

Economists wonder whether future hikes this year will be necessary

The Federal Reserve Bank raised interest rates .25% today. The move was widely expected by economists and investors, moving the overall target range to 5% to 5.25%. This increase marks the sixth consecutive meeting at which the central bank has boosted rates, and the 10th since March 2022.

Rising interest rates: ©Nuthawut - stock.adobe.com

Rising interest rates: ©Nuthawut - stock.adobe.com

The interest rate boosts are an attempt by the Fed to tame inflation, but recent indicators still show an inflation level that is still well above the bank’s 2% target. One gauge favored by the Fed shows annual inflation around 4.7% in March, a slight decrease from August 2022 and up from 3.9% in March 2022. The Consumer Price Index was 5% in March, down from 8.5% the same time last year.

According to private payroll processer ADP, private payrolls rose by 296,000 for April, well above the Dow Jones estimate of 133,000. The gain was the highest monthly increase since July 2022.

In its announcement, the Fed dropped hints that this hike might be the last for a while. Missing from today's statement was a sentence about the committee anticipating some additional policy firming being appropriate to achieve its 2% inflation goal.

However, the statement reinterated the Fed may have to raise rates and “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.”

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