The Federal Reserve on Wednesday issued its smallest interest rate hike since June as the central bank attempts to curb high inflation without derailing a surprisingly resilient economy.

The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for monetary policy, bumped up the bank’s baseline interest range by 0.5 percentage points Wednesday to a span of 4.25 to 4.5 percent. 

After issuing four straight rate hikes of 0.75 percentage points earlier in the year, the Fed’s smaller Wednesday increase marks a turning point in its battle with high inflation. 

Even so, U.S. households will still see rates on mortgages, auto loans, and credit cards rise well into next year. And Fed leaders have pledged to keep interest rates high until inflation is finally quashed for good.

Fed officials are attempting to balance promising signs of inflation slowing with concerns about a strong economy spurring it higher. 

The annual inflation rate as measured by the consumer price index (CPI) fell to 7.1 percent in November from 7.7 percent in October, according to data released Tuesday by the Labor Department. While annual inflation has fallen well below its peak of 9.1 percent in June, it’s still much higher than the Fed’s target of 2 percent. 

With inflation still high, Fed officials have been reluctant to ease up on interest rate hikes, which are meant to reduce inflation by slowing the economy. Higher interest rates leave households and businesses with less money to spend, forcing businesses to freeze or cut prices to compensate for the drop in sales.

While Fed’s rapid rate hikes have triggered a severe slowdown in the housing sector and a decline in stock values, the rest of the economy has held strong. The U.S. is still adding more than 200,000 jobs a month, consumer spending is still rising and retail sales have held strong.

But many economists are still fearful that the combination of higher interest rates, slowing growth abroad and delayed impacts of Fed rate hikes will tip the U.S. into recession if the Fed doesn’t relieve some pressure on the economy.

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