The central bank of the US has reportedly approved yet another steep increase in interest rates in an effort to deal with the rapidly increasing prices. According to the Federal Reserve, the benchmark interest rate was raised by 0.75% points, reaching its highest level since early 2008.
The bank believes that increasing borrowing costs will ease economic pressure and slow the rising prices. However, some worry that the acts could signal the beginning of a serious fall. The benchmark of the bank’s lending rate has now soared to a range of 3.75% to 4%, which is the highest in fourteen years.
Jerome Powell, the chairman of the Federal Reserve, issued a warning claiming that rates were likely to increase once more, calling the speculation of the bank pausing, premature.
In response to their own inflation issues, which have been fueled by a variety of factors, including higher energy prices as a result of the conflict in Ukraine, several other nations have also raised rates.
In a similar context, the Bank of England began raising interest rates in the UK last year, but it has chosen to do so more gradually than the Fed. The Bank of England will likely announce its own 0.75% points increase on Thursday i.e., 3rd November, making it the largest such move since 1989.
Some areas of the economy, like housing, have already begun to slow down as a result of the substantial increase in borrowing costs.
According to Powell, there are now few indications that the pricing pressures are continuously reducing, despite his assertion that restoring price stability is essential to maintaining a robust economy.
While the exact level of rates is still unknown, Powell stated that it seemed likely that they will end up being higher than what bank policymakers had initially anticipated.