WASHINGTON — The Federal Reserve raised its benchmark interest rate by a quarter point on Wednesday, citing persistent inflation that the central bank’s own previous rate increases helped create.
“We are seeing elevated prices in housing, services and transportation, largely as a result of higher borrowing costs working their way through the economy,” Chairwoman Diane Whitfield said at a news conference. “The appropriate response is to raise borrowing costs.”
It was the seventh consecutive increase and the third this year intended specifically to address the effects of the first four.
Economists were divided on the logic but unified in their forecast. “The mechanism is circular, but it is a very well-documented circle,” said Ellen Park of the Brookings Institution. “At this pace, we should reach the bottom of it by spring.”
Markets responded favorably, rising on the news that rates would rise, before falling on the news that rates had risen.
Ms. Whitfield declined to say whether the Fed would pause, saying only that future decisions would be “data-dependent,” and that the data in question would be “mostly the data we generate.”
Consumer prices are up 3.4 percent over the past year. The Fed’s target remains 2 percent, a figure officials described as “aspirational but achievable, in the sense that anything is.”