Federal Reserve Again Raises Rates by a Quarter Percentage Point

May 3, 2023

The Federal Reserve recently increased the benchmark interest rate by a quarter of a percentage point, the 10th increase since March 2022.

The increase takes the benchmark federal funds rate, the amount banks charge each other for overnight loans, to a target range between 5%-5.25%, the highest since August 2007. The decision by the rate-setting Federal Open Market Committee (FOMC) was unanimous.

In its post-meeting statement, the FOMC notably excluded a sentence from the previous statement that had said some additional policy firming may be appropriate for the Fed to achieve its goal of returning inflation to 2%. The statement also reiterated the Fed “will 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” when considering future hikes.

In his post-meeting press conference, Federal Reserve Chairman Jerome Powell called the change in the statement language regarding future policy firming “meaningful” but also said that “the process of getting inflation back down to 2% has a long way to go.”