The US Federal Reserve has raised interest rates to their highest level in 16 years in a fight to stabilize prices.
The Federal Reserve raised interest rates by 0.25 percentage points – the 10th hike in 14 months.
The moves have sharply increased the cost of borrowing in the world’s largest economy, triggered a slowdown in sectors such as housing and played a role in the recent collapses of three US banks.
The Fed signaled Wednesday’s surge could be the last for now.
The bank began aggressively raising interest rates last year as prices in the US rose at their fastest pace in decades.
The moves have increased the target range for the benchmark interest rate to between 5% and 5.25% from near zero in March 2022.
Central banks around the world, including the UK and Europe, have taken similar action.
Higher interest rates make it more expensive to buy a home, borrow money to expand a business, or take on other debt. By raising those costs, officials expect demand to fall and prices to cool.
Since the start of the Fed’s campaign, US rate hikes have shown signs of slowing down.
In March, inflation, the rate at which prices are rising, was 5% – the lowest in almost two years – although it’s still uncomfortably high for the Fed, which is targeting a 2% rate.
Gregory Daco, chief economist at EY-Parthenon, said he thinks the Fed would be “cautious” about pausing now, noting that risks to the economy increase if activity slows.
“The fear of a recession is very present in the economy today,” he said. “I don’t think the inflation battle is over but we are in a situation where we are seeing gradual disinflation and we are also in an environment where interest rates are high and elevated and should therefore limit business activity , which should lead to further disinflation in the coming months.”
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