July 31, 2023 — Interest Rates Rise 0.25 Percent


As anticipated, the Fed raised rates by 0.25 percent at their meeting last week, the 11th increase since March 2022. Rates are now at their highest level in 22 years. Fed officials say there could be another 0.25 percent rate increase later this year as the Fed continues to target inflation which they say “remains elevated”. A subsequent rate increase will depend on whether the economy strengthens and puts upward pressure on prices.

The Fed will study the labor market which seems to be slowing. Job openings are down from the peak, though the unemployment rate continues to hover near historic lows. A tight labor market creates wage pressure which, in turn, pushes up consumer prices.

On Thursday, preliminary data was released that showed the US economy grew at 2.4 percent in the second quarter of this year. This figure exceeded expectations and topped first quarter growth of 2 percent. Analysts say the data is indicative a resilient economy.

The Federal Funds rate is in the range of 5.25 to 5.5 percent. The Fed upgraded the prospect of economic growth to “moderate” from “modest”, while they describe inflation as “elevated” and job gains as “robust”.