US Fed lifts rates to highest since 2001 and hints at more to come

The U.S. Federal Reserve raised its benchmark lending rate on July 26 to the highest level since 2001 to tackle above-target inflation, and signaled it could hike again later this year amid improving economic prospects.

"Policy has not been restrictive enough for long enough to have its full desired effects," Fed Chair Jerome Powell told reporters after the decision to lift interest rates by a quarter percentage-point was announced.

"So we intend, again, to keep policy restrictive until we're confident that inflation is coming down sustainably toward our two percent target, and we're prepared to further tighten if that is appropriate," he added.

The increase, after a brief pause in June, brings the Fed's key lending rate to a range between 5.25 percent and 5.5 percent.

In a statement, the U.S. central bank said it will "continue to assess additional information and its implications for monetary policy," looking at a range of data points "in determining the extent of additional policy firming."

This indicates that officials see the possibility of more monetary tightening ahead.

"We're going to be going meeting by meeting," Powell said.

At the previous meeting of the rate-setting Federal Open Market Committee (FOMC) in June, the median forecast was for two additional rate hikes this year.

The latest quarter percentage-point rise, which was in line with analysts' expectations, is the Fed's 11th since it began an aggressive campaign of monetary tightening in March 2022 in response to rising prices.

Although inflation has continued to fall since the decision in June to pause rate hikes, it remains above target, suggesting more policy action may be needed.

"Inflation has moderated somewhat since the...