Fed raises rates, hints at possible end to hikes

The Federal Reserve has increased interest rates for the 10th time in over a year, raising the benchmark borrowing rate by 0.25 percentage points to a target range of 5%-5.25%. The move was widely expected by markets, but the focus is now on where the Fed will go from here. The post-meeting statement offered some clarity, suggesting that while tight policy could remain in effect, the path ahead is less clear for actual interest rate hikes as policymakers assess incoming data and financial conditions. The decision comes amid U.S. economic fragility and over the objections of prominent Democratic lawmakers who urged the Fed this week to stop rate hikes, which they insisted could cause a recession and excessive loss of jobs. However, the labor market has remained strong since the increases started in March 2022, and inflation is still well above the 2% target that policymakers consider optimum. Multiple officials have said rates probably will need to stay elevated even if the increases are put on hold. Along with inflation, the Fed has had to deal with tumult in the banking industry that has seen three mid-size banks shuttered. Fed officials insist they are focused squarely on inflation. Recent data points have indicated a softening in price increases, though "sticky" items such as housing costs and medical care have remained higher, while prices that tend to change a lot, such as food and energy, have decelerated. Markets are anticipating that slower growth and the possibility of recession will force the Fed to cut rates later this year. The labor market has remained resilient, with hiring by private sector companies increasing by 296,000 in April, well ahead of economists' expectations.