Given the highest inflation in more than 40 years, the US Federal Reserve has raised its key interest rate the most since 1994. On Wednesday, he decided to raise interest rates by 0.75 percentage points to the new range of 1.50 to 1.75 percent. This unusually large move was to be expected in financial markets given the recent surprise rise in inflation to 8.6 percent.
At the same time, monetary watchdogs indicated they would make several additional payments this year to keep inflation in check. They aim for an average interest rate of 3.4 percent before the end of the year. In March, they had envisioned a value of 1.9 percent. In the longer term, the aim is to achieve an interest rate of 2.5 percent. In March, the monetary authorities aimed for 2.4 percent.
Financial markets nervous about interest rate hike
Recently, fears have spread in financial markets that the central bank could tighten the reins on inflation to such an extent that the economy was in danger of sliding into recession. The US stock markets barely reacted on Wednesday to the interest rate hike by the US Federal Reserve. After a few short swings, the indices initially stabilized near the levels seen before the announcement. At about 8:15 p.m., the Dow Jones was 0.20 percent higher at 30,424.52 points. After the rate hike, the index occasionally fell slightly into the red, but then recovered quickly.
The US Federal Reserve expects higher inflation this year than it was estimated three months ago. Inflation is expected to average 5.2 percent in 2022, despite planned rate hikes, up 0.9 percentage points from the previous forecast in March, central bank data showed on Wednesday.
Inflation still at record rate
Core inflation, excluding food and energy prices, is expected to be 4.3 percent this year. Since the start of the corona pandemic, the Fed has had to adjust its inflation forecast upwards several times. The Fed is committed to the goals of price stability and full employment.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
