Federal Reserve Imposed Highest Interest Rate Hike Since 1994

On Wednesday, the Federal Reserve increased the interest rates considering the rising inflation in the United States. It is the highest rate hike by the Fed since 1994. 

After a Federal officials meeting of two days, the central bank raised interest rates by 75 basis points. This move will help boost the Federal Funds rate between 1.5% to 1.75%. 

In a remark, the Federal Reserve talked about the factors that necessitate the call for a surge in interest rates, such as increasing inflation that has been caused due to demand and supply inequality. Moreover, Fed pointed out the supply-side issues caused due to the Russia-Ukraine conflict and China’s lockdown that has hampered the global supply chain. 

The inflation was slightly under control in April while it increased back in May. 

As per the Labour Department’s Consumer Price Index, inflation bounced to 8.6%, on the other hand, the Producer Price Index indicated a 10.6% increase the previous month. 

In spite of the expectancy for the Federal Reserve to execute essential measures to handle inflation without triggering a recession, numerous corporate professionals have strongly anticipated a recession. 

Ex-chairman of White House Council of Economic Advisers, Jason Furman has tweeted saying that Fed’s decision is a ‘good move’, but also pointed out it as ‘overly optimistic’  as there will be a considerable decrease in inflation till next year. 

Dan North, an economist at Allianz Trade North America, said that Fed’s step to increase rates may be untimely to control a recession. Moreover, Mr North pointed out that the Fed is far behind the inflation curve and has taken too much time to take necessary steps.

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