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2h ago
18.20 GMT
Fed raises rates for sixth consecutive time as
fight against inflation continues
The Federal Reserve has once again raised interest
rates in a bid to lower the United States’ stubbornly high rate of inflation by
tightening the ability of businesses and consumers to borrow money.
Inflation
has been a major factor in president Joe Biden’s low approval ratings among
voters. In the run-up to the central bank’s two-day meeting that concluded
today, some Democratic senators had urged its policy setting committee to
proceed cautiously or even hold off on another increase, saying rates that are
higher than necessary could harm the economy.
Here’s more
on the Fed’s decision from The Guardian’s Dominic Rushe:
The Federal
Reserve stepped up its fight against a 40-year high in US inflation on
Wednesday, announcing its fourth consecutive three-quarters of a percentage
point hike in interest rates.
With the
cost of living crisis battering consumers and Joe Biden’s political fortunes,
Fed officials have now imposed six rate rises in a row, the sharpest increases
in interest rates since the 1980s, when inflation touched 14% and rates rose to
nearly 20%.
The Fed’s
latest increase brings the federal funds rate – which acts as a benchmark for
everything including business loans, credit card and mortgage rates – to
between 3.75% and 4% after sitting at 0% for more than a year during the
coronavirus pandemic.
The central
bank does not expect inflation or interest rates to reach the levels seen in
the 80s. Chair Jerome Powell has indicated that the Fed expects rates will
reach 4.4% by the end of the year and start coming down until 2024. Fed
officials had expected inflation to decline this year.
But
inflation – which the Fed initially dismissed as “transitory” – remains
stubbornly high. In September, the costs of goods and services were 8.2% higher
compared to a year ago, well above the Fed’s target inflation rate of 2%.
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