December 4, 2022

Taylor Daily Press

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Another sharp rate hike in the US to curb inflation

Another sharp rate hike in the US to curb inflation

AFP

NOS news

Interest rates in the US continue to rise in the fight against inflation. The US central bank, the Fed, has a fourth interest rate It continued to increase by 0.75 percent. This is the sixth rate hike this year.

The central bank wants to counter sharp price rises with new interest rate hikes. In the US, food prices have been rising at their fastest pace since the 1970s, while wages have lagged behind. Economy is one Key themes By-election next week.

The central bank said the key interest rate is now in the range of 3.75 to 4.00 percent. This is the highest level in fifteen years. In comparison, the European Central Bank raised deposit rates At the end of October At 0.75 to 1.5 percent, it is very low.

Low inflation, low economic growth?

Central banks around the world are trying to reduce inflation. An important tool for this is raising interest rates. The hope is that this will slow the growth of the economy, and with it an increase in prices (and thus inflation). It’s a balancing act for central bankers. If the economy cools too much, a recession threatens.

Federal Reserve Chairman Jerome Powell attended an economic conference in late August Jackson Hole Already ahead of further interest rate hikes in the US. He said at the time that he knew raising interest rates would hurt Americans financially. It will hurt some people,” he said at the time.

Stock markets are not happy with interest rate hikes. This makes borrowing more expensive for companies, putting pressure on profits. And the prospect of lower profits again leads to a fall in prices. Higher interest rates make lending more attractive than investing in stocks.