Interest rate will rise by 0.75 percent to further reduce inflation.
The US Federal Reserve has raised its key interest rate in the US by 0.75 percent to curb high inflation. It marked the Federal Reserve’s fourth rate hike this year, the last three of which saw interest rates increase by three-quarters of a percentage point. The central bank is expected to raise interest rates further in the near future.
The prospect of a sharp interest rate hike rose sharply earlier this month after inflation cooled slightly in the world’s biggest economy, but was much lower than experts had generally expected. Previous efforts by the central bank to control hyperinflation have not had the desired effect. Due to the increase, the interest rates ranged from three to 3.25 percent. The central bank now predicts that interest rates will reach 4.4 percent by the end of the year. This means the next interest rate hike of 0.75 percentage point is immediate. Policymakers expect interest rates to rise to 4.6 percent next year.
Investors fear that sharp interest rate hikes by central banks could trigger a global recession. Policymakers have previously said they are taking the pain of a recession out of interest rate hikes. Much attention will be paid to Fed Chairman Jerome Powell’s presentation.
In a statement Wednesday after a two-day meeting in Washington, the central bank reiterated that it remains “extremely cautious of inflationary risks.” The central bank said further interest rate hikes would be appropriate and was “committed to bringing inflation back to the two percent target.”
The decision to raise the interest rate was taken unanimously. Powell and his colleagues were criticized for initially being slow to respond to mounting price pressures. This backlash has been created by the “policy of occupation”. The Fed raised rates at such a pace four decades ago under Fed Chairman Paul Volcker.
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