May 3, 2023 -WASHINGTON (AP) — The Federal Reserve reinforced its fight against high inflation Wednesday by raising its key interest rate by a quarter-point to the highest level in 16 years. But the Fed also signaled that it may now pause its streak of 10 rate hikes, which have made borrowing for consumers and businesses steadily more expensive.
In a statement after its latest policy meeting, the Fed removed a sentence from its previous statement that had said “some additional” rate hikes might be needed. It replaced it with language that said it will weigh a range of factors in “determining the extent” to which future hikes might be needed.
Speaking at a news conference, Chair Jerome Powell said the Fed has yet to decide whether to suspend its rate hikes. But he pointed to the change in the statement’s language as confirming at least that possibility. Powell said the Fed would continue to monitor the latest economic data in deciding whether to pause its hikes.
The Fed’s rate increases since March 2022 have more than doubled mortgage rates, elevated the costs of auto loans, credit card borrowing and business loans and heightened the risk of a recession. Home sales have plunged as a result. The Fed’s latest move, which raised its benchmark rate to roughly 5.1%, could further increase borrowing costs.
Still, in its statement and at Powell’s news conference, the Fed made clear that it doesn’t think its string of rate hikes have sufficiently cooled the economy, the job market and inflation. Inflation has dropped from a peak of 9.1% in June to 5% in March but remains well above the Fed’s 2% target rate.