Fed Hikes interest rate by half a percentage point as expected

The Federal Reserve has decided to raise interest rates by half a percentage point at the end of its two-day policy meeting on Wednesday to continue its fight against inflation.

Inflation, as noted in Tuesday’s CPI report, has eased to 7.1% in the 12 months to November from a blistering 9.1% pace in June, which is giving the Fed breathing room to shrink the size of its rate hikes.

However, the Fed’s still a long way from its 2% inflation goal, which means this is unlikely to be the last rate increase, economists say. The Fed has already raised rates six times this year to a range between 3.75% and 4% from near zero at the start of the year.

The last four increases were supersized at 0.75 percentage point each. With another half-point hike expected, the cumulative increase to date would rank among the most aggressive increases since the 1980s to try to tame the highest inflation in 40 years.