WASHINGTON: The United States Federal Reserves on Wednesday (local time) raised its benchmark interest rate by 25 basis points, the highest in the past 22 years, according to Fox Business.

The benchmark federal funds rate now lies at a range of 5.25 per cent to 5.5 per cent, the highest since 2001, further restricting economic activity as the borrowing costs for homes, cars and other items march higher.

This is the 11th rate increase since the Fed began its inflation fight in March 2022 and comes just one month after the central bank hit 'pause' in order to assess the state of the economy after the failures of three regional banks since the spring, as per Fox Business.

Fed officials are estimating one more rate hike this year, according to their latest set of projections. Inflation’s steady slowdown in recent months has been encouraging for American consumers and businesses, but officials reiterated in their post-meeting statement that “inflation remains elevated” and that the Fed “remains highly attentive to inflation risks,” suggesting that another rate hike remains on the table, reported CNN.

Last month, the US Federal Reserve's monetary policy committee paused the key interest rate. The policy rate has been maintained at 5.0-5.25 per cent, which was near zero after the outbreak of COVID-19.

Barring the latest pause, the US central bank has hiked the interest rate for the tenth consecutive time which was necessitated in the fight against soaring inflation.

"Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy," US Federal Reserve monetary policy statement said.

Meanwhile, the Fed’s preferred inflation gauge — the Personal Consumption Expenditures price index — rose 3.8 per cent in May from a year earlier, down from the prior month’s 4.3 per cent. Meanwhile, the core measure inched down to 4.6 per cent from 4.7 per cent during the same period, which was still its lowest level since October 2021. The Commerce Department releases June figures on Friday, according to CNN.