US central bank announces highest rate hike since 2000

The Federal Reserve has raised its policy rate by 0.5 percentage point towards a target of between 0.75 and 1 percent. The US central bank has announced on Wednesday† This is the largest rate hike for the Fed in twenty-two years. With the decision, Federal Reserve Chairman Jerome Powell hopes to do something about the high inflation in the country. “We see that this causes pain,” Powell said according to American media.

Also read: ECB president Lagarde: rate hike possible from July

It is the second rate hike in a relatively short period of time: last month the Fed announced an increase of 0.25 percentage point. Another meeting of the central bank will be held in June, which may lead to another rate hike. Powell suggested another half percentage point increase. Analysts previously speculated about an interest rate hike that would approach 2.5 percent by the end of the year.

Braking inflation is the main reason for raising the main rate. In March, prices in the United States rose by 8.5 percent compared to the same period a year earlier, inflation was not that high in 40 years. The country has relatively low unemployment and a tight labor market in the United States. Powell even called that shortage “unsustainable”.

In Europe too, inflation is high. Christine Lagarde, President of the European Central Bank, hinted last month potentially raise interest rates in July to curb currency depreciation on the continent. Lagarde presented no concrete plans yet; the first rate hike could in theory also happen towards the end of the year. Inflation in Europe has been pushed up by factors such as high energy prices and the war in Ukraine.

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