The U.S. Federal Reserve increased interest rates by a quarter of a percentage point

due to interest, making it the highest U.S. central bank policy rate in 22 years.

Rate Hike and Policy Statement

The rate hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25%-5.50% range, and the accompanying policy statement left the door open to another increase.

Assessment of Monetary Policy

“The (Federal Open Market) Committee will continue to assess additional information and its implications for monetary policy,” the Fed said in language that was little changed from its June statement and left the central bank’s policy options open as it searches for a stopping point to the current tightening cycle.

Inflation Target and Economic Impact

As it stated in June, the Fed said it would watch incoming data and study the impact of its rate hikes on the economy “in determining the extent of additional policy firming that may be appropriate” to reach its 2% inflation target.

Remaining Hawkish Stance

Though inflation data since the Fed’s meeting in June has been weaker than expected, policymakers have been reluctant to alter their hawkish stance until there is more progress in reducing price pressures.

Job Gains and Economic Growth

Key measures of inflation remain more than double the Fed’s target, and the economy by many measures, including a low 3.6% unemployment rate, continues to outperform expectations given the rapid increase in interest rates.

Job gains remain “robust,” the Fed said, while it described the economy as growing at a “moderate” pace, a slight upgrade from the “modest” pace seen as of the June meeting. The U.S. government on Thursday is expected to report the economy grew at a 1.8% annual pace in the second quarter, according to economists polled by Reuters.

Possible Last Rate Hike

However, with about eight weeks until the next Fed meeting, a longer-than-usual interlude, continued moderation in the pace of price increases could make this the last rate hike in a process that began with a cautious quarter-percentage-point increase in March of 2022 before accelerating into the most rapid monetary tightening since the 1980s.

Press Conference and Future Rate Increase

Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the decision and policy statement, and perhaps provide more details on what may push the central bank toward another rate increase or away from one.

Economic Projections

In the most recent economic projections from Fed policymakers, 12 of 18 officials expected at least one more quarter-percentage-point increase would be needed by the end of this year. (Reporting by Howard Schneider; Editing by Paul Simao)