US Fed raises rates by 1/4 point as pace of hikes slows

HOUSTON (ICIS)–The US Federal Reserve raised its benchmark federal funds rate by a quarter of a point to 4.50-4.75 on Wednesday, lower than the half-point increase in December and in line with market expectations amid continued strong employment data and easing inflation.

The Federal Open Market Committee (FOMC) raised rates by 0.75 point after each of its previous four meetings prior to the December meeting in its efforts to stem inflation and return it to its target of 2%.

The FOMC said inflation has slowed somewhat but remains elevated as Russia’s war against Ukraine continues to cause economic hardship and is contributing to global uncertainty.

The committee said it anticipates continued increases going forward while also continuing to reduce its holdings of Treasury and mortgage-backed securities, keeping with the plan announced in May.

The FOMC will continue to 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 as it decides the rate of future increases.

ICIS chief economist Kevin Swift said the US economy is likely to enter a relatively mild recession in 2023 while speaking at a meeting of the Societe de Chimie Industrielle in New York, noting that inflation has peaked and is starting to moderate.

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