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US Federal Reserve Imposes Sharp Interest Rate Hike

https://ift.tt/8XkcJwA U.S. Federal Reserve announced Wednesday that it would impose a sizable hike in its benchmark interest rate in an effort to combat high inflation.

The central bank bumped up the federal funds rate — the interest rate at which banks lend money to each other, usually on an overnight basis — by three-quarters of a percentage point, so that it now sits in a range of 1.5 percent to 1.75 percent.

It’s the biggest increase in the rate since November 1994, and it came as inflation — a sustained rise in the overall price levels of goods and services in an economy, expressed as a percentage — rose to 8.6% in May. That’s the highest figure in 40 years and has been driven by high post-pandemic demand for homes, cars, travel and other goods and services; global supply chain problems; COVID-19 lockdowns in China; and Russia’s invasion of Ukraine.

In a statement announcing the rate hike, the Federal Open Market Committee, the Federal Reserve’s policy-setting board, said it remained “strongly committed to returning inflation to its 2% objective.”

The three-quarter-point rate increase exceeded the one-half-point jump that Federal Reserve Chairman Jerome Powell had previously suggested would be imposed. Powell told reporters shortly after Wednesday’s announcement that the Fed would likely impose either a half-point or three-quarter-point increase at its next meeting in July.

He said the latest information showed that the inflation rate in the U.S. was higher than it was expected to be.

“We thought strong action was warranted at this meeting,” he said, “and we delivered that.”

Some information for this report came from The Associated Press, Reuters and Agence France-Presse.

Author webdesk@voanews.com (VOA News)
Source : VOA

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