U.S. interest rates are now at their highest level since the global financial crisis, as the U.S. central bank hiked rates again in an effort to reduce inflation.
The Federal Reserve, or Fed for short, mandated a 0.50 percentage point rate hike.
The widely expected rise would mean higher borrowing costs for U.S. mortgage holders and those paying off credit card debt.
After hike, U.S. rates held at 4.25% to 4.5%, from 3.75% to 4% last increase November.
In the US, interest rates are a range rather than a single percentage like in the UK because the Fed is not allowed to set a specific number. Instead, the target rate is set as a guideline for banks to follow.
up less than four previous excursions Or 0.75 percentage point, indicating that the Fed is slowing the pace of the fight against inflation.
It has embarked on a program of rate hikes to bring inflation down to its 2% target.
Pace of rate hikes slows as inflation picks up in world’s largest economy seems to be slowing downPrices rose 7.1% in the year to November, down from a 40-year high of 9.1% in June, the Labor Department said Tuesday.
After announcing its latest rate hike, the Fed was adamant that it would not ease back on its move to raise rates.
Speaking after the decision, Fed Chairman Jerome Powell said he expected interest rates to continue rising and to remain high for some time.
He said rates could hit 5.1 percent by the end of next year in response to persistently high inflation, half a percentage point higher than forecast in September.
He warned that the impact of rising interest rates on inflation would take time, adding: “We are seeing the impact on demand in the most interest rate-sensitive sectors of the economy, such as housing. However, it will take time for the full impact of monetary tightening, especially is the effect on inflation.”
Still, he acknowledged that the U.S. economy has slowed “significantly.”
He expects GDP growth, a measure of economic output, to be small, at just 0.5% this year and next.
However, the U.S. labor market remains “extremely tight,” with the unemployment rate near a 50-year low, job vacancies “remain very high,” and wage growth accelerating.
Mr Powell recognizes the pain that inflation causes American families. But he said there would be no further reductions to the 2% target for the next two years.
The Fed forecasts inflation at 5.6% this year, 3.1% next year, 2.5% in 2024, before falling to 2.1% in 2025.
“We understand our actions affect communities, families and businesses across the country. Everything we do is in the service of our public mission,” he said.
similar decision interest rate will be given by bank of england Thursday. The Bank of England is also expected to raise the cost of debt to curb economic activity and curb inflation.
central bank has legs No increase required United Nations Conference on Trade and Development rates.
It warned that monetary regulators tightening policy and raising interest rates could lead to a recession deeper than that seen after the global financial crisis.