Fed hikes rates by 0.25% to put further squeeze on inflation following June skip

investing.com:

Investing.com — The Federal Reserve raised interest rates by a quarter-point on Wednesday, signaling the need to put a further squeeze on elevated inflation after skipping a hike last month.

The Federal Open Market Committee, or FOMC, the rate-setting arm of the Fed, raised its benchmark rate to a range of 5.25% to 5.5%.

It was the eleventh rate hike in the cycle, taking rates to the highest level in 22 years, Federal Reserve chairman Powell was eager to keep the central bank's monetary policy options flexible, saying either a hike or pause was on the table for September. 

«It is certainly possible that we would raise funds again at the September meeting if the data warranted, Powell said. It's possible that we would choose to hold steady at that meeting ... we're going to be making careful assessments meeting my meeting.»

The remarks leave the door open to another hike later this year, giving the Fed ample room to adjust policy should inflation pick up. 

«This Fed meeting was about going for maximum flexibility, giving them the ability to do one more quarter-point hike, but not more than that,» Phillip Colmar, global strategist at MRB Partners told Investing.com's Yasin Ebrahim in an interview Wednesday. 

«They've revised away the recession call, which I think was appropriate, but  they suggested that inflation wasn't going to come down to the 2% target until 2025, which gives them flexibility in the months ahead,» Colmar added. 

Powell's reluctance to provide further clues on the pace of rate hikes, left market pricing on November rate hike close to unchanged from where it was before the meeting at about 40%, Jefferies said in a Wednesday note.

«We suspect Powell is probably pretty happy about that,» it added. 

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