The US Federal Reserve raises the interest rate again to 3.25%

In its latest move, the US Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point to get ahead of rapid inflation.

The central bank’s decision was in line with economists’ expectations, although it was thought the Fed could hike further – by a full percentage point.

Instead, the Fed raised its trend setting by 75 basis points for the third time in a row. The Federal Reserve’s interest rate is now at its highest level since 2008, and policymakers are signaling they’re not done yet: Officials forecast they would raise their benchmark interest rate to around 4.4 percent by the end of the year, a full percentage point higher than they had predicted in June.

This aggressive path for interest rates speaks to how much of a problem policymakers see inflation as. Inflation rates around the world have risen to multi-decade highs in recent years, prompting central banks to take a number of measures to bring it under control.

All things being equal, central banks raise interest rates when they want to cool an overheated economy and lower interest rates when they want to stimulate borrowing to grow the economy.

In a press conference following the decision, Federal Reserve Chairman Jerome Powell made it clear that the US central bank is not afraid to keep interest rates where they are and raise them as long as it takes to control inflation.

They “want to be very confident that inflation will come back down,” he said.

Barry Schwartz, chief investment officer at Toronto-based Baskin Wealth Management, says it will be difficult for the Fed to do its job of reducing inflation without causing pain in the broader economy.

“The big danger is that the Fed overshoots by raising rates too quickly, too high, which leads to a worsening economy,” he said in an interview with CBC News on Wednesday.

The Fed’s move will make it more expensive to get a mortgage or other loans and will undoubtedly cool consumer spending in the process. The average U.S. 30-year mortgage rate topped 6.4 percent last week, the highest level in 14 years.