The US Federal Reserve raised its benchmark lending rate on Wednesday by a quarter of a percentage point.
This is the highest level since 2001 and is the Fed's 11th hike in its last 12 meetings.
What did the Fed say about the hike?
The Fed indicated that it could implement further increases in the future. It said that it will "continue to assess additional information and its implications for monetary policy."
The rise lifted the Fed's key lending rate to a range between 5.25 and 5.5%.
Federal Reserve Chair Jerome Powell said that inflation in the US remains "well above" the central bank's target of 2%.
"The process of getting inflation back down to 2% has a long way to go," he said.
"My colleagues and I are aware that high inflation imposes significant hardship as it erodes purchasing power," Powell said in a statement, adding that this was especially true for "those least able to meet the higher costs of essentials like food, housing, and transportation."
US economy sees 'moderate' growth'
Key measures of inflation remain more than double the 2% target set by the Fed.
However, job gains remain "robust," and the US economy was growing at a "moderate" pace, the Fed said.
Powell said that "we do have a shot" for inflation to return to the Fed's target without a substantial increase in unemployment.
The US government is expected to report on Thursday that the economy grew at a 1.8% annual pace, the Reuters news agency cited economists as saying.
The Fed's chair said that the central bank's staff are "no longer forecasting a recession."
"So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession," Powell said.
The Fed had in its June policy meeting predicted a mild recession starting later in 2023.