This was the seventh rate hike this year by the Fed in an unprecedented set of measures to reign in inflation. These harsh measures, which have the effect of curbing spending which slows down production, had, it was feared, could trigger a recession.
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Washington: The US Federal Reserve has hiked interest rates by 50 basis points taking it to a target range between 4.25 per cent and 4.5 per cent. This decision by Federal Open Market Committee (FOMC) in its fight against inflation has taken the benchmark interest rates to their highest level since 2007.
The Fed has also indicated that the rate hikes will be happening on a regular basis for some time now, with no reductions until 2024. The expected “terminal rate,” or point where officials expect to end the rate hikes, was put at 5.1%, according to the FOMC’s “dot plot” of individual members’ expectations.
“We have more work to do,” said Federal Reserve chairman Jerome H. Powell, at a news conference.
This was the seventh rate hike this year by the Fed in an unprecedented set of measures to reign in inflation. These harsh measures, which have the effect of curbing spending which slows down production, had, it was feared, could trigger a recession.
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“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the Fed said in a statement at the end of a two-day meeting of its top policy body.
“Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are contributing to upward pressure on inflation and are weighing on global economic activity.”
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The Fed expects inflation to be 5.6 per cent at the end of the year and fall to 3.1 per cent in 2023.
Despite the recent dip in inflation, Powell said “inflation risks are to the upside”.
