updated
On Wednesday evening, US monetary policy came into focus. The US Federal Reserve announced an interest rate hike following its interest rate meeting.
-
After the US Federal Reserve cut interest rates during the pandemic, they are now raising them.
-
The Fed is raising interest rates by 0.25 percentage points amid the highest inflation rate in decades.
-
The committee aims to achieve maximum employment and an inflation rate of two percent over the longer term.
The US Federal Reserve has heralded an interest rate turnaround in view of the highest inflation rate in decades. The key interest rate will be raised by 0.25 percentage points, the Federal Reserve said on Wednesday in Washington following a two-day meeting of its Open Market Committee. The Fed lowered interest rates to between zero and 0.25 percent in March 2020 due to the devastating effects of the corona pandemic on the economy.
With the rate hike, the Fed is now attempting to counteract the recent significant rise in inflation. Most recently, rising prices for fuel, food and housing in the United States caused inflation to rise to its highest level in four decades at 7.9 percent in February. The consequences of the Russian attack on Ukraine continue to drive consumer price inflation.
The war will “likely create additional upward pressure on inflation” and weigh on the economy, the Fed said. That is why “continued increases” in the key interest rate are “appropriate”, the Federal Reserve went on to say. At the same time, the central bank raised its inflation forecast for the current year from 2.6 percent to 4.2 percent – and lowered the growth forecast from 4.0 percent to 2.8 percent.
(dpa/fos)