Fed Raises Rates Seven Times, Reaching 15-Year High

The Board of Governors of the United States Federal Reserve (The Fed) raised its benchmark interest rate (Fed Funds Rate) by 50 basis points (bps) to a range of 4.25%-4.5% in December 2022. This is the highest level in the last 15 years.

This was the seventh rate hike of the year. Cumulatively, from March to December 2022, The Fed raised interest rates by 425 bps.

The Fed raised its benchmark interest rate to curb inflation, which stemmed from rising energy and food commodity prices due to the Russia-Ukraine war.

United States (US) inflation reached 9.1% (yoy) in June 2022, its highest level in several decades.

The Fed's policy has strengthened the US dollar against major world currencies. This is reflected in the US Dollar Index, which reached a high of 114 in October 2022.

With the rise of the US dollar, the import costs of energy and food commodities have become more expensive for countries that do not use the US dollar.

In November 2022, US inflation fell to 7.1% (yoy), compared to 7.7% (yoy) the previous month. This decline in inflation was the fifth consecutive decrease from its peak in June 2022.

Persistently high inflation gives the Fed room to raise its benchmark interest rate in the coming months. Current US inflation is still far above the target of 2%.

Here's a breakdown of annual US inflation in November 2022:

Overall Inflation: 7.1% (yoy)

1. Food Inflation: 10.6% (yoy)
* Home food inflation: 10.6% (yoy)
* Away-from-home food inflation: 12% (yoy)

2. Energy Inflation: 13.1% (yoy)
* Energy commodity inflation: 12.2% (yoy)
* Energy services inflation: 14.2% (yoy)