US Fed downshifts campaign to tame inflation with smaller rate hike but still ‘some ways to go’

The United States Federal Reserve moderated its all-out campaign to cool inflation on Wednesday, lifting the benchmark lending rate by a half percentage point though warning there is still “some ways to go”. America’s central bank has taken aggressive moves to ease demand in the world’s biggest economy, hiking rates seven times this year with interest-sensitive sectors like housing already reeling from tightening policy. Its latest increase takes the rate to 4.25-4.50 per cent, the highest since 2007. But officials signalled that their battle to cool the US economy is not yet over. In a statement, the Fed’s policy setting Federal Open Market Committee (FOMC) said it “anticipates that ongoing increases in the target range will be appropriate” to reach a stance restrictive enough to rein in inflation. A quarterly forecast released with Wednesday’s decision also saw policymakers downgrade US economic growth to 0.5pc in 2023, just narrowly avoiding a contraction. They also raised their unemployment and inflation estimates for next year. “Fifty basis points is still a historically large increase, and we still have some ways to go,” Fed Chair Jerome Powell told reporters in a press briefing after the rate announcement, and markets slumped on the central bank’s signals.