US Fed's interest rate hike continues in fight against inflation, raises by 25 bps

WASHINGTON: The US monetary policy committee, seeking to achieve inflation at the rate of 2 per cent in the long run, hiked key interest rate by another 25 basis points to 5.0-5.25 per cent at its latest two-day review meet held during May 2-3.

The Committee of the Federal Reserve, US' central bank on Wednesday went for another rate hike.

The Committee said it remains "highly attentive" to inflation risks.

The latest hike was the same as the previous rate increase in the March meeting and marked its tenth straight rate hike.

Meanwhile, consumer inflation in the US moderated in March to 5.0 per cent from 6.0 per cent the previous month, but the numbers are still way above the 2 per cent target. It was at 6.4 per cent in January, and 6.5 per cent the month before.

The US central bank's current policy rate, which is now in a target range of 5.0-5.25, the highest in several years, and notably, it was near zero in the early part of 2022.

Raising interest rates typically help in cooling demand in the economy and thus helps in managing inflation.

"The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation," the US Fed said in its monetary policy statement, adding that the Committee is strongly committed to returning inflation to its 2 per cent objective.

Economic activity expanded steadily in the first quarter, job gains have been robust in recent months, and the unemployment rate has remained low.