The Federal Reserve pushed interest rates to a 22-year high Wednesday, one month after a brief respite in hikes during the central bank’s race to bring down historic inflation.

The Fed hiked its baseline interest rate range by 0.25 percent to a span of 5.25 to 5.5 percent. It is the Fed’s 11th interest rate hike since March 2022, a dizzying ascent from near-zero interest rates at the beginning of last year.

All 11 voting members of the Federal Open Market Committee (FOMC), the panel of Fed officials charged with managing monetary policy, supported the rate hike.

Interest rates are among the sharpest tools in the Fed’s toolbox to hack away at high inflation, which is finally falling after squeezing consumers for the last two years.

Inflation peaked at 9.1 percent annually last June, a 40-year high that sparked fears of a recession on the horizon. Price growth has since fallen to 3 percent year over year as of last month, according to consumer price data released by the Department of Labor.

While this is a marked improvement from the same period last year, Fed officials are wary of pulling back on rate hikes before inflation is closer to the bank’s 2 percent annual target.

Inflation slowed to 3 percent in June, hits lowest rate in two years

Fed officials unanimously voted to pause in June after months of falling inflation, but several members privately expressed support for hiking rates last month. The economy is growing and adding jobs at a slower pace than before the Fed began hikes, but still faster than many economists expected it would after a series of rapid rate increases.

While 0.25 percent doesn’t sound like a lot, incremental rate hikes can have a profound impact on the economy — and Americans’ wallets. 

From savings account yields to the cost of carrying a credit card balance, interest rate hikes drive up the cost of borrowing in an effort to curb inflation-driving spending.

Though some Wall Street experts predicted rate hikes could tip the economy into another recession, the prognosis has improved

Nearly three-quarters of the 52 business economists surveyed by the National Association for Business Economics (NABE) in June put the odds of a recession hitting in the next 12 months as 50 percent or less. That’s down significantly from a 50-50 split in NABE’s April survey.

Consumer confidence also jumped to its highest level in two years in July, according to the business research group The Conference Board.

Updated at 2:10 p.m.