The US Federal Reserve raised interest rates to a 22-year high on Wednesday as it continued its fight against rising inflation. The decision to increase rates by a quarter-percentage point to a range of 5.25% to 5.5% comes after the Fed paused its rate-rising cycle last month. US inflation has now declined for 12 straight months and is currently running at an annual rate of 3%, down from over 9% in June last year. The Fed has raised rates from near zero in an attempt to cool the economy and bring prices down. The US economy has remained robust despite the 11 rate rises the Fed has now implemented – its most aggressive rate-rising cycle in 40 years. Hiring has slowed but remains strong and the unemployment rate is still close to a record low. Fed chair Jerome Powell said the central bank was closely monitoring the economic data ahead of its next meeting in September. “It is certainly possible that we would raise funds again at the September meeting if the data warranted,” he said. “And I would also say it’s possible that we would choose to hold steady at that meeting. We’re going to be making careful assessments, as I said, meeting by meeting.” Some Fed officials have expressed fears that recent falls in the pace of price rises may be temporary. This month Fed governor Christopher Waller said the last inflation report “warmed my heart, but … I’ve got to make policy with my head. And I can’t do that on one data point.” But Waller has also warned that the full effect of the Fed’s rate rises may not yet be apparent in the economy and that the US could face a “‘Wile E Coyote’ moment where nothing happens for a long time and then wham … off the cliff we go as the full force of past policy actions suddenly take effect”. The rate rises have sent mortgage rates and car loan prices soaring. The average long-term US mortgage rate climbed to just under 7% this week, the highest level since November. Rising rates are making it more difficult for Americans to obtain credit. According to the New York Fed, in June the rejection rate for credit applicants increased to 21.8%, the highest level since June 2018, with would-be car buyers hit hardest. In June the rejection rate for auto loans increased to a record 14.2% from 9.1% in February.