The Federal Reserve Bank of the United States has announced the largest hike in interest rates in almost two decades as it steps up its battle against rapidly growing prices.
A half-percentage-point increase in the benchmark interest rate was announced by the Federal Reserve, after a smaller increase in March.
Further increases are projected in light of the fact that US inflation is at its highest point in 40 years.
With this move, the government is making yet another attempt to keep rising prices to a minimum for people all across the globe.
The Reserve Bank of Australia just implemented its first rate hike in more than a decade, while the Reserve Bank of India surprised markets on Wednesday with an increase to its benchmark rate.
On Thursday, the Bank of England is anticipated to hike interest rates for the fourth time since December, according to most analysts.
Jerome Powell, head of the Federal Reserve, remarked in a news conference on Wednesday that “inflation is far too high and we realize the difficulty it is creating.”
It will be brought down as quickly as possible, said the team.
People, corporations, and governments may have to pay more for loans if banks raise interest rates.
Price inflation is expected to be reduced as a result of it.
As new threats develop, such as the conflict in Ukraine and the recent Covid shutdowns in China, their actions might lead to a dramatic economic downturn.
A former member of the Federal Reserve’s rate-setting committee, Donald Kohn, described the situation as “a tight road they must tread.” There will be a lot of work involved in this endeavor.
As food and energy prices continue to rise, the US saw inflation reach 8.5% in March, the highest annual rate since 1981.
Since it is far more than the bank’s 2% aim, US Vice President Joe Biden has begun to use it as a political football. As a result of circumstances such as Covid supply shortages, an energy market shock from Ukraine’s conflict, and huge government expenditure to boost the economy when the epidemic struck, many economist believe that Fed policy has been too sluggish to react.
“They’ve fallen far behind the times. According to my estimation, the majority of central banks are, “Said Fed veteran and Mercatus Center Senior Fellow Thomas Hoenig, who retired after almost 40 years of service.
Instead of correcting their mistake, “they’ll pay a heavy price in terms of a possible recession” if they attempt to shock economies with substantial rises in interest rates.
