The US Federal Reserve hiked interest rates by 0.75% to fight inflation – the largest hike in 28 years.
The Federal Reserve announced more rate hikes and forecast a slowing economy along with rising unemployment in the coming months.
The bank raised its policy rate to a range of 1.5% to 1.75%, not seen since the pandemic began.
The increase will make it more expensive for people, businesses and governments to borrow, affecting consumer products like credit cards and mortgages.
Fed Chair Jerome Powell had previously ruled out such a large hike, but last month’s unexpected surge in inflation – which many had hoped had peaked – forced the bank to change course.
Data released on Friday showed US inflation hit a 40-year high of 8.6% in May, one of the highest in the world.
In a statement, the Federal Open Market Committee cited the impact of the war in Ukraine and lockdown policies in China on rising consumer prices.
Officials upgraded their forecasts for interest rates at the end of this year and next, expecting the median policy rate to hit 3.4% by the end of 2022.
In March, this rate had been forecast at 1.9%.
It is expected to hit 3.8% by the end of 2023 versus the March forecast of 2.8%.
The revision suggests Fed officials expect inflation to last longer than before.
Mr Powell said he doesn’t expect increases of 75 percentage points to be common.
US inflation numbers have prompted a sharp sell-off in bonds and stocks by investors anticipating Wednesday’s rate hike.
The S&P 500 entered the bear market on Monday after falling 20% from its January peak.
Other countries are also raising interest rates to combat inflation.
In the UK, the Bank of England is expected to raise interest rates by 0.25% to 1.25% on Thursday.
US interest rates rise 0.75%, the sharpest rise in almost 30 years | business news
Source link US interest rates rise 0.75%, the sharpest rise in almost 30 years | business news