Fed Hikes Interest Rates to a 22-Year High

The expectation was that the Federal Reserve would lift its key interest rate for the 11th time in 17 months, and that's exactly what came to pass on Wednesday. The quarter-point hike brings the the Fed's short-term rate to roughly 5.3%, the highest level since 2001. As with its previous rate hikes, Wednesday's increase will likely further elevate the costs of mortgages, auto loans, credit cards, and business borrowing—the idea being that making those things more expensive will further cool the demand for goods, services, and labor, reports NBC News.

Inflation amounted to just 3% in June compared with a year earlier, down drastically from a peak of 9.1% in June of last year and closer to the Fed's 2% target. Yet the Fed's rate hike Wednesday, after it chose to skip a rate increase last month, points to the dangers that remain. Underlying inflation is still well above the Fed's target. A price gauge that excludes volatile food and energy costs, known as "core" inflation, rose 4.8% in June compared with 12 months earlier. The AP's take: As long as such measures stay elevated, Fed officials will feel compelled to keep rates high—and possibly raise them further.

In June, the policymakers signaled that they expected to impose two more increases, including Wednesday's hike. The Wall Street Journal expects investors will be listening for indications in Jerome Powell's press conference that the central bank's next meeting will be "live," which would suggest a rate hike "will be strongly considered at the Sept. 19-20 meeting." (More Federal Reserve stories.)