The Federal Reserve slowed its pace of interest rate raises to 0.25% this week, the lowest increase since March. The move brings the benchmark federal funds rate to a range of 4.5%-4.75%, the highest since 2007.
But don’t pop the champaign bottle yet. The Fed was clear that the rate hikes will continue, although it hasn’t specified a time, and that means a continuation of uncertainty and the difficulty of attaining price discovery.
The hike is the Federal Open Market Committee's eighth consecutive raise and comes as US inflation continues to decline from a June high of 9.1% to December's 6.5%. Further quarter-point hikes are expected in March and May.
Unemployment, which tends to rise as the Fed raises rates, remains at a historic low of 3.5%, while job openings increased by 600,000 to 11 million in December. Learn about the Fed's dual mandate to keep inflation and unemployment down here.
The move came a day after the International Monetary Fund upgraded its outlook on global economic growth to an annual rate of 2.9%, up from 2.7% in October.
Predictions by many is that the Fed will hike at least two more times, taking the overnight rate above 5%, and once they pause, they will keep interest rates constant until at least the end of the year (contrary to what many people are saying).