The main US interest rate has been at historically low levels of 0 to 0.25 percent since March 2020. In mid-March, the rate was increased to 0.25 to 0.50 percent. Today, the Federal Reserve announced another sharp hike from half a percentage point to 0.75 to 1 percent.
“It is a remarkably large increase in the interest rate, because the Federal Reserve usually increases or decreases incrementally by a quarter of a percentage point. It has been since 2000 that it has raised interest rates so sharply,” explains economics journalist Steven Rombaut.
The increase is an attempt to cool inflation in the US. It rose to 8.5 percent in March in the United States, the highest level in 40 years.
Higher interest rates can slow down consumption somewhat and thus reduce the pressure on prices. The other side of the coin is that that weighs on economic growth. It is therefore important to find a good balance.
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