The Central Bank of the United States (USA), The Federal Reserve or The Fed, announced on Wednesday (4/5) raising the benchmark interest rate 50 basis points or 0.5 percent as a continuation of efforts to tackle the highest inflation in four decades. The 0.5 percent increase was the highest increase the Fed has made since May 2000.
This increase follows a 0.25 percent increase in the benchmark interest rate that the Fed has made in March. Now interest rates in the US are at 0.75 percent.
This increase will have the effect of increasing the cost of all types of loans, including mortgages, credit cards to car payments. This is predicted to dampen demand and business activity.
AFP explained that inflation in the US has become a major concern after the world’s largest economy experienced a spike in inflation of 8.5 percent over the past 12 months, the highest since December 1981.
According to CNN, Americans are currently experiencing price increases for everything from grocery items to fuel. The Russia-Ukraine conflict, which is currently taking place, is not likely to subside in the near future.
“The implications for the US economy are highly uncertain. The invasion and related events create additional pressure on inflation and are likely to weigh on economic activity,” the Fed said in a statement.
The Fed also warned lockdown related to the pandemic in China is likely to weigh on an already troubled supply chain.
(fea)
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