The US Federal Reserve believes it is winning the battle against inflation, but Wednesday imposed yet another hike to the Federal Funds rate – this time a smaller increase of a quarter-percentage-point.

In Bermuda, Butterfield Bank responded immediately by raising its interest rates on loans and mortgages also by 0.25 per cent.

The Fed said it had turned a key corner in the fight against high inflation, but that there was still a requirement that rates remain elevated at least through the end of this year.

It has already been a year of larger hikes, but the Fed cited a long list of reasons, from war to the pandemic, that prices continued to be driven higher.

A Butterfield spokesman said that in response to the 25 basis point increase in the target range of the US federal funds rate, it was adjusting its base interest rates on loans and mortgages by a quarter of a percentage point.

The bank said: “The change in base rates applies to Bermuda dollar residential mortgages, consumer loans, corporate loans and USD loans.

“The rate increase on loans takes effect February 6, 2023. The rate increase for existing Bermuda residential mortgages is effective 90 days later.”

The bank stated that customers seeking more information on the change should contact the bank’s consumer credit department.

Earlier, the Fed Chair, Jerome Powell, said in a news conference: "We can now say for the first time that the disinflationary process has started."

He was speaking at the end of the Fed's latest two-day policy meeting, with goods price increases slowing, pandemic-related shortages easing, and supply chains getting back to normal.

"This is a good thing," the Associated Press reported him as saying.

Yet "it's just the early stages," Powell said. "We're going to be cautious about declaring victory and … sending signals that we think that the game is won, because we've got a long way to go."

Important segments of the economy, including broad swathes of the service sector, have yet to see inflation slow, the Fed chief said, while a high level of job openings and still-strong wage increases showed the labour market was "extremely tight."

The rate hikes imposed by the Fed since March have now totalled 4.5 percentage points, with the policy rate now in a range between 4.5 per cent and 4.75 per cent, the highest since 2007.