December 16, 2022

The US central bank increased interest rates once more, but cautioned that additional hikes would be required to slow the rate at which prices are rising.

According to Federal Reserve projections, the bank’s benchmark interest rate may exceed 5% in one year.

However, in response to indications that the most extreme inflation in decades may be beginning to reduce, officials are beginning to act with greater caution.

They concurred to an increase of 0.5% in the bank’s benchmark interest rate.

The Fed’s benchmark rate was thus raised to its highest level in 15 years, a target range of 4.25% to 4.5%.

But compared to recent pronouncements, it was a modest gain.

Jerome Powell, the chairman of the Federal Reserve, stated that the bank intended to take a step back to observe how the economy was responding to the cumulative effect of the hikes, which have raised the costs of credit card debt, auto and business loans, and mortgages.

Since the US is driving a global transition to higher borrowing costs following years of low interest rates in the wake of the financial crisis, the bank’s actions are being closely scrutinized throughout the globe.

After authorizing a larger increase last month, the Bank of England, which has warned that the nation is experiencing its deepest recession on record, is anticipated to announce its own 0.5 percentage point increase on Thursday. A similar move by the European Central Bank is imminent.

The Fed increased rates for the eighth time this year on Wednesday.

The bank is acting in response to inflation in the US, which is still close to a 40-year high even though it has decreased since peaking at 9.1% in June, supported by a reduction in oil prices.

According to the most recent US statistics, consumer prices increased 7.1% over the last year ending in November, down from 7.7% in October.

Source: BBC
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