For the first time since March 2022, the Federal Reserve has executed a so-called “normal-sized” rate hike of 25 basis points. The Fed’s decision was widely anticipated by markets and marks the eighth consecutive rise in the lending rate in less than a year.

It also represents the second meeting in a row the Fed has slowed down the pace of rate hikes. The move brings the federal funds rate to a range of 4.5% to 4.75%, its highest level since 2007.

The Fed’s rate hike campaign has tightened money supply in the U.S., making borrowing significantly more expensive, as evidenced in the housing market, and the efforts appear to be working in the fight against 4-decade high inflation.

Consumer prices continued climbing through June 2021, peaking at 9.1% annual inflation. Since then, the rate of inflation has steadily declined and in December, overall consumer prices deflated month over month by 0.1%. The annual rate of consumer price increases notched 6.5% that month, a key indicator that inflation is decreasing. The Fed’s preferred gauge of inflation, personal consumption expenditures, rose at an annual rate of 5% in December. The Fed’s target inflation rate remains 2% over the long term.

But in its announcement Wednesday, the Federal Reserve noted that the work is far from over. The open market committee said it still anticipates “ongoing” increases to the rate will be necessary to reach the target inflation rate. The next meeting will take place over two days on March 21-22.

The committee has previously indicated it believes the target borrowing rate will need to rise above 5% before holding the rate that high for the rest of the year. The markets have doubted that resolve, with some forecasting a Fed pivot before 2024.

In a statement reaffirming its strategy, the committee said that its objectives on inflation and employment are “generally complementary.” But the statement noted that in times they are not complementary, “it takes into account the employment shortfalls and inflation deviations” and the different time horizons it may take for both to return to satisfactory levels.

The Fed has previously warned that to get inflation under control, the unemployment rate would likely rise. Despite December 2022’s unemployment rate matching a 50-year low of 3.5%, the Fed committee anticipates unemployment will rise to 4.6% in 2023.