Fed slows rate hikes, signals more increases are coming

The Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.

Chair Jerome Powell and fellow policy-makers lifted the Fed's target for its benchmark rate by a quarter percentage point to a range of 4.5 per cent to 4.75 per cent. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that.

Powell told reporters at his post-meeting news conference that policy will need to remain restrictive “for some time” and that officials would need “substantially more evidence” to be confident that inflation was on track to decline to the Fed's 2 per cent target.

The unanimous decision by the Federal Open Market Committee was in line with financial market expectations.

“The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 per cent over time,” the Fed said issued after the

two-day policy-making meeting, repeating language it has used in previous communications.

In a sign that the end of the hiking cycle may be in sight, the committee said the “extent of future increases” in rates will depend on a number of factors including cumulative tightening of monetary policy. It had previously tied the “pace” of future increases to those factors.

In another shift from its last statement, the Fed noted that inflation “has eased somewhat but remains elevated,” suggesting policy-makers are growing more confident that price pressures have peaked.

That compares with prior language where officials simply stated price growth was “elevated.”

Investors will be watching to see if Powell pushes back against market expectations that the Fed will it end its tightening campaign soon and cut rates later in the year as inflation eases and economic growth slows.