The Federal Reserve enacted a major rate hike on Wednesday, the latest in a series of borrowing cost increases, as the central bank tries to slash near-historic inflation while avoiding a recession.
The Fed raised its benchmark interest rate 0.75%, repeating the same hike it instituted last month.
The hike follows data released earlier this month showing that prices jumped a staggering 9.1% in June. That inflation rate, last seen more than four decades ago, put additional pressure on the Federal Reserve to raise rates.
Federal Reserve Chair Jerome Powell on Wednesday reasserted the central bank's commitment to bring inflation down to a target rate of 2%, saying the Fed is well-equipped to achieve that goal.
"My colleagues and I are strongly committed to bringing inflation back down and we're moving expeditiously to do so," Powell said at a press conference.
"We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses," he added.
An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand. That means borrowers will face higher costs for everything from car loans to credit card debt to mortgages. But the approach risks pushing the economy into a recession.
"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the Fed said in a statement on Wednesday.
"Russia's war against Ukraine is causing tremendous human and economic hardship," the Fed added. "The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity."
The Fed said it expects additional rate hikes will be "appropriate."
Mixed economic data shows a country buoyed by robust hiring and retail sales despite several rate hikes so far this year meant to slow economic activity. The U.S. saw stronger than expected job growth in June, as the economy added 372,000 jobs and the unemployment rate remained at 3.6%.
Other indicators, however, such as flagging consumer confidence and slowing home sales, suggest the economy has begun to weaken.
U.S. consumer confidence fell this month to a level not seen for one-and-a-half years, according to a closely followed Conference Board survey released on Tuesday. Meanwhile, in June, existing home sales plummeted 5.4% compared with the month prior -- the fifth straight month of decline, according to data released last week by the National Association of Realtors.
If the Fed raises interest rates too quickly, an abrupt economic slowdown could send the economy into a downturn, Andrew Levin, a former Fed economist and a professor at Dartmouth College, told ABC News.
"There are definitely some indicators now that the economy is slowing," he said.
"The question for the Fed is: Are we really heading into a recession?" he added. "If so, is that going to slow the Fed's efforts to fight inflation?"
The 0.75% rate hike raises the Fed's benchmark interest rate to a range of 2.25% to 2.5%.
On Thursday, a day after the Federal Reserve announcement, a federal agency will release gross domestic product data that shows whether the U.S. economy grew or contracted over the three-month period ending in June.
Because the economy shrank at an annual rate of 1.4% over the first three months of the year, a contraction in the second three-month period would establish two consecutive quarters of falling GDP, which many consider a shorthand benchmark for a recession.
The National Bureau of Economic Research, or NBER, a research organization seen as an authority on measuring economic performance, uses a more complicated definition that takes into account several indicators. This definition determines whether a downturn is formally designated as a recession, since the NBER is the official arbiter on the subject.