Federal Reserve hikes key interest rate again to 4.75% — and signals more to come

The U.S. central bank raised its target interest rate by a quarter of a percentage point on Wednesday, and promised "ongoing increases" in borrowing costs as part of its ongoing battle against inflation.

"Inflation has eased somewhat but remains elevated," the Federal Reserve aid in a statement that marked an explicit acknowledgement of the progress made in lowering the pace of price increases from the 40-year highs hit last year.

Russia's war in Ukraine, for example, was still seen as adding to "elevated global uncertainty," the Fed said. But policymakers dropped the language of earlier statements citing the war as well as the COVID-19 pandemic as direct contributors to rising prices.

Still, the Fed said the U.S. economy was enjoying "modest growth" and "robust" job gains, with policymakers still "highly attentive to inflation risks."

"The (Federal Open Market) Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two per cent over time," the Fed said.

But in keeping the promise of more rate hikes to come, the Fed pushed back against investor expectations that it was ready to flag the end of the current tightening cycle as a nod to the fact that inflation has been steadily declining for six months.

It's also a departure from the outlook the Bank of Canada gave last week, when Canada's central bank hiked its rate to 4.5 per cent but signaled that it may be content to keep its rate there.