On Wednesday, policymakers at the Federal Reserve, which acted as the central bank of the United States, did something they hadn’t done since 2018: They raised their key interest rate by 0.25 percentage points. After the decision, Federal Reserve Chairman Jerome Powell said interest rates are expected to rise six more times this year in an effort to slow rising inflation and cool the US economy.
With the coronavirus epidemic waning and the economy restarting, consumer prices are starting to rise around the world, with US inflation hitting a 40-year high this year at 6.1%. The world’s central banks, including the Federal Reserve, have pumped a lot of money into the economy recently in an effort to mitigate the crisis caused by the pandemic, but now they need to change direction, and this cycle of higher interest rates is also signaling this change of direction.
With the increase just announced, the key interest rate remains astonishingly low in the US, where the rate has essentially been 0% since March 2020. However, the decision may be a signal to economic agents that the central bank has changed direction and focused on addressing Inflation rather than stimulating the economy.
Jerome Powell said that the situation was exacerbated by the Russian occupation of Ukraine, although it was not yet possible to determine the impact on the US economy, it would certainly put serious inflationary pressures on it. (The New York Times)
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