New Delhi: The United States Federal Reserve on Wednesday increased its interest rate by 75 basis points to 1.75 percent in an attempt to control inflation. This is the biggest hike by the country’s central bank in 28 years. The Federal Reserve had previously raised the interest rate by 25 basis points in March and by 50 basis points in May.
In the views of the US-based economists, The aggressive strategy is likely to further slow the economy, and increases the risk of recession and as per the prediction – the rate would rise to about 1.9 percent by December.
The latest hike comes five days after the country’s labour department said that inflation in the United States was at a four-decade high of 8.6 percent driven by high fuel and housing prices.
According to a media report, Federal Reserve Chair Jerome Powell said that “the central bank was committed to bringing inflation down to its target rate of 2 percent. We thought strong action was warranted…and we delivered that. We are not trying to induce a recession now. Let’s be clear about that,”
More hikes could be announced in the coming months, he added.
According to Moody’s, the higher interest rates could damage the economy of the US.
“The Federal Reserve is going to hike interest rates until policymakers break inflation, but the risk is that they also break the economy. Growth is slowing and the effect of the tightening in financial market conditions and removal of monetary policy has yet to hit the economy,” Ryan Sweet, Moody’s Analytics head of monetary policy research said in a research note.
(Vinayak)