Fed chief Powell has reason to celebrate as US inflation continues to moderate

THE US Federal Reserve raised interest rates on Wednesday (Jul 27) as expected. The central bank left the door open for more rate hikes, as expected too, and chairman Jerome Powell’s tone was slightly victorious, as hoped.

The stock market treaded water after the Fed lifted its benchmark rate a quarter-of-a-percentage-point to a range of 5.25 per cent to 5.5 per cent, the highest in 22 years, with an accompanying statement that reiterated prior sentiments about monitoring economic data before deciding on its next step.

Stocks briefly took flight after Powell noted the progress that the Fed had already made in bringing inflation down, and the likelihood that the full impact of its 10 previous rate increases had not yet been felt. The rally foundered when Powell switched to a more cautionary tone when discussing the dangers of wage inflation.