The US Federal Reserve has approved another sharp rate hike as it struggles to rein in rapidly rising prices.
The Federal Reserve announced that it would raise interest rates by 0.75 percentage points, the highest rate since early 2008.
The bank hopes that raising the cost of borrowing will cool the economy and lower price inflation.
But critics fear the moves could trigger a serious downturn.
The latest hike brings the reference rate to 3.75% – 4%, a range that is the widest since January 2008.
Many other countries are moving with the US to raise borrowing costs as they grapple with their own inflationary woes.
In the UK, the Bank of England started raising interest rates last year, but has so far opted for smaller hikes than the Fed. The Bank of England is expected to announce its own 0.75 percentage point hike on Thursday – the largest such move since 1989.
Soaring borrowing costs have already started to cool some parts of the economy, such as housing.
However, economists say a further economic slowdown is needed if inflation is to return to what is considered a healthy 2% level.
“There’s always hope for painless, flawless disinflation,” said economist Willem Buiter, a former member of the Bank of England’s Monetary Policy Committee who is now an independent economic adviser. “Unfortunately, there are very few historical episodes that fit this picture”.
“It won’t be a pleasant year,” he added.
Inflation — the rate at which prices are rising — hit 8.2% in the US last month and continued to decline after hitting 9.1% in June — the highest rate since 1981.
A drop in energy prices has helped ease the pressure, but the cost of groceries, medical bills, and many other things are still rising.
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