fed says it will factor in cumulative interest rate hikes and lags from prior moves the federal reserve on wednesday raised a key interest rate again but it also signaled it was ready to pause and said further monetary tightening would depend on how inflation and the economy respond to sharply higher borrowing costs the quarter percentage point increase in the feds benchmark interest rate put it in a range of 5525 up from near zero just a little over a year ago thats the highest level since the great recession of 2008 the fed also reworked the language in its postmeeting statement scrapping a line saying that some additional hikes may be needed instead the fed said its actions would be dictated by the cumulative tightening of monetary policy the lags with which monetary policy affects economic activity and inflation and economic and financial developments the dovish tone of the new language suggests the fed would take a more finely tuned approach at future meetings talk about cumulative monetary tightening and policy lags have mainly been the talking points of officials who are more worried about the growth of the economy than the level of inflation there were no dissents that suggests even those voting members who have been more concerned about inflation like fed gov christopher waller can work with it for now the feds softer language still left open the possibility it could raise rates again if inflation remained high chairman jerome powell in a press conference after the rate hike repeated that the fed is determined to tame high inflation the fed is aiming to reduce inflation now running at 42 rate based on its preferred pce index to its 2 target within the next few years yet the latest rate hike could very well be the last of the current cycle powell himself suggested interest rates could be restrictive enough to do the job in getting inflation back down to prepandemic levels the feds own projections signal that the range of 5525 would be a good place to pause while some officials advocate more hikes only a minority of fed watchers are forecasting more tightening the fed made what is very likely the last quarter percentage point rate hike of the cycle said chief economist bill adams of comerica bank at the same time the fed is continuing its socalled quantitative tightening plan to slowly let its balance sheet shrink todays move was the tenth straight meeting with an interest rate rise as the fed battles high inflation sparked by government spending and supply disruptions during the pandemic the fast pace of tightening  the quickest in 40 years  has shaken the banking system and led to the collapse of three of the countrys major banks economists and fed officials think the bank sector troubles will slow lending and hurt us growth adding to the pressure on the economy from the fed rate hikes just two months ago the feds staff forecast a mild recession beginning later this year powell for his part said he did not agree this is not my own most likely case he said the fed chairman said he thought the economy would slow this year but keep expanding many investors think the economy will slow so much or even tip into recession that the fed will cut rates by the end of the year powell and other senior fed officials on the other hand have repeatedly said they expect to keep rates high through the end of the year it would not be appropriate to cut rates powell said given current forecasts for the economy and inflation the standoff between us house republicans and the biden white house over raising the debt ceiling is another major worry going forward if it is not increased by june 1 the government may default on its debt treasury secretary janet yellen said earlier this week this content was created by marketwatch which is operated by dow jones  co marketwatch is published independently from dow jones newswires and the wall street journal