Federal Reserve raises its key rate for 11th time by a quarter-point

WASHINGTON (AP) — The Federal Reserve raised its key interest rate Wednesday for the 11th time in 17 months, a streak of hikes that are intended to curb inflation but that also carry the risk of going too far and triggering a recession.

The move lifted the Fed's benchmark short-term rate from roughly 5.1 per cent to 5.3 per cent — its highest level since 2001. Coming on top of its previous rate hikes, the Fed's latest move could lead to further increases in the costs of mortgages, auto loans, credit cards and business borrowing.

Though inflation has eased to its slowest pace in two years, Wednesday's hike reflects the concern of Fed officials that the economy is still growing too fast for inflation to fall back to their 2 per cent target.

With consumer confidence reaching its highest level in two years, Americans keep spending — crowding airplanes, travelling overseas and flocking to concerts and movie theatres. Most crucially, businesses keep hiring, with the unemployment rate still near half-century lows.

In a statement, the Fed said the economy "has been expanding at a moderate pace," a slight upgrade from its assessment in June. It's a sign that it sees the economy as slightly healthier than it was just last month.

A key question swirling around the Fed is whether Wednesday's increase will be its last or whether it will hike again later this year. Some Fed officials have said they worry that the still-brisk pace of job growth will lead workers to demand higher pay to make up for two years of inflationary prices. Sharp wage gains can perpetuate inflation if companies respond by raising prices for their customers.

Follow The Gleaner on Twitter and Instagram @JamaicaGleaner and on Facebook @GleanerJamaica. Send us a message on WhatsApp at 1-876-499-0169 or email us at onlinefeedback@gleanerjm.com or editors@gleanerjm.com.