Fed raises rates by a half point as central banks enter new phase

 Shift down from 0.75 point increases comes ahead of similar moves expected by BoE and ECB

Grab a $750 PayPal Gift Card Now

The Federal Reserve on Wednesday raised its benchmark policy rate by half a percentage point and signalled its intention to keep squeezing the US economy next year, as central banks on both sides of the Atlantic enter a new phase in the battle against inflation.

Grab a $750 PayPal Gift Card Now

At its final gathering of the year, the Federal Open Market Committee voted unanimously to increase the federal funds rate to a target range of 4.25 per cent to 4.5 per cent, ending a months-long string of 0.75 percentage point rate rises. The pivot to smaller rate rises is likely to be followed internationally, with the European Central Bank and the Bank of England both poised to increase borrowing costs by half a percentage point on Thursday. Economists say that inflation has peaked in all three regions, with reductions in the headline rate in the US and UK this week, but central banks remain worried that it will take too long to fall towards their 2 per cent targets. In a press conference following the decision, Fed chair Jay Powell said: “We’ve covered a lot of ground and the full effects of our rapid tightening so far are yet 

Grab a $750 PayPal Gift Card Now

to be felt. We have more work to do.” Powell welcomed the reduction in headline price growth in October and November but warned “it will take substantially more evidence to give confidence that inflation is on a sustained downward path”. In its statement the Fed said that “ongoing increases” in the policy rate would be “appropriate” in order to ensure it is restraining the economy enough to bring price growth under control. Trading was choppy following the statement and Powell’s press conference. The S&P 500 closed 0.6 per cent lower and the Nasdaq Composite shed 0.8 per cent. The two-year Treasury yield, which moves with interest rate expectations,