The Federal Reserve said Wednesday it will raise its short-term lending rate another 0.5%, continuing its efforts to slow the economy and rein in inflation, slowing a series of aggressive rate hikes.

Rising borrowing costs are in line with economists’ forecasts.

The latest rate hike pulls the Fed back from three consecutive 0.75% hikes, signaling the central bank’s confidence that it can bring sky-high inflation back to normal.

While interest rate hikes will slow some areas of the economy, such as home sales, the full effect of rising borrowing costs remains to be seen, Federal Reserve Chairman Jerome Powell said Monday after the rate hike.

“The US economy has slowed significantly from last year’s rapid pace,” he said. “However, it will take time to reach the full effects of monetary sanctions, especially on inflation.”

This year

Andrew Harnick/AP, File

“Fifty basis points is still a historically large increase, and we still have some way to go,” he said. “We will stay the course until the job is done.”

The move would raise the short-term lending rate to a target range of between 4.25% and 4.5%, the highest level in 15 years. The Fed’s forecast shows the central bank won’t call the next rate hike until 2024.

Each of the major stock indexes fell about 1% on the news.

The move came a day after it said inflation was 7.1 percent last month, continuing to fall for months from a 40-year record high reached in the summer. However, inflation has been running at more than three times the Fed’s 2% target rate.

In a statement on Wednesday, the Fed expects that further rate hikes will be needed to further reduce inflation.

“Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, food and energy prices and broader price pressures,” the central bank said.

The announcement marks the latest in a string of increases in borrowing costs imposed by the Fed in recent months to slow inflation and dampen demand. However, the approach risks plunging the United States into recession and putting millions out of work.

Photo: In this July 27, 2022 file photo, Federal Reserve Board Chairman Jerome Powell speaks at a news conference in Washington, DC.

In this July 27, 2022 file photo, Federal Reserve Board Chairman Jerome Powell speaks at a news conference in Washington, DC.

Mandel Ngan/AFP via Getty Images, File

However, the labor market remains strong so far, bolstering policymakers’ hopes of averting a recession but raising concerns about long-term inflation due to rising wages.

Hiring last month was better than expected and wages rose 5.1% from a year ago.

But rising wages often prompt companies to raise prices to offset the additional costs, which can exacerbate inflation and make it harder to reverse.

Despite a strong labor market, growing data suggests the Fed’s rate hikes have put the brakes on some economic activity.

Home sales fell for the ninth month in a row in October, the latest month on record. Sales of existing homes, such as single-family homes and condominiums, fell 28 percent from a year earlier.

Meanwhile, data from the Commerce Department showed that the personal savings rate fell to 2.3% last month, the lowest rate in nearly two decades. The inability to accumulate more funds suggests that savings built up during the pandemic have weakened under the weight of high prices.

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