Fed Reserve increased the interest rate Wednesday by 25 basis points up to 5.25% while hinting at a rate hike pause in the short term.
A Fed review meeting observed that the economic activity expanded at a modest pace in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low although inflation remains high, said Federal Open Market Committee (FOMC) that reviewed the economy.
The U.S. banking system is sound and resilient, an FOMC press release after the meeting said.
"Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks," FOMC said.
The Committee is targeting employment generation and inflation reduction at the rate of 2% over the longer run. "In support of these goals, the Committee decided to raise the target range for the federal funds rate to 5 to 5-1/4 percent," it said. "The Committee will closely monitor incoming information and assess the implications for monetary policy."
The report added: "In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the Committee 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. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt, and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2% objective.
"In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.