US Federal Reserve hikes interest rates by another three-quarter-point

US Federal Reserve hikes interest rates by another three-quarter-point

by Sakina Raj

The US Federal Reserve has reportedly announced its decision to raise interest rates by nearly three-quarters of a percentage point, the second such hike in less than a month, as the US economy faces a looming recession and a four-decade high inflation.

The Fed stated that it is extremely attentive to risks imposed by rising inflation.

Current production and spending indicators have weakened. However, job growth has been strong in recent months, and the unemployment rate has stayed low.

The Fed stated that elevated inflation persists, indicating demand and supply imbalances pertaining to the COVID-19 pandemic, increased energy and food prices, as well as broader price pressures.

The central bank stated that Russia and Ukraine war is causing immense economic and human hardship, creating  additional upward inflationary pressure and weighing on economic activity across the globe.

The US central bank is vigorously increasing rates to levels not seen since the mid-1990s as it tries to dissipate surging prices, which soared by 9.1%  in June of this year, the highest growth rate since 1981.

The hike elevates the Fed's borrowing costs to between 2.25% and 2.5%, marking the fourth rate hike this year. The move comes as central banks around the world seek to dissipate price increase by raising interest rates. Fed Chair Jerome Powell warned that if inflation is not controlled, there will be increased repercussion on the economy r.

Powell further stated that the United States is not presently in a recession, but that the Fed must slow growth to curb inflation.

However, Wall Street stocks rose dramatically after Powell's statement, which some investors interpreted as easing concerns about further rate hikes this year. The tech-heavy Nasdaq rose over 4%, while the benchmark S&P 500 index rose 3.9%, marking their most considerable one-day percentage growth since April 2020.

The United States created 372,000 jobs in June, and the rate of unemployment remained low at 3.6%.

For many, however, two months of decreasing GDP is a clear indicator that the economy is facing a downturn.

Source credit: https://www.theguardian.com/business/2022/jul/27/fed-increase-interest-rates-inflation

Sakina Raj

Armed with a degree in English Literature, Sakina chose to explore the world of content writing and pursue it as a career. Sakina has been playing with words for over five years now and currently pens down articles for Marketprimes and various other online portals relating to diverse domains. Whe Read more...