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Fed raises interest rates by half a percentage point

Fed raises interest rates by half a percentage point
Written by Arindam
Fed raises interest rates by half a percentage point

It’s the first time in 22 years that the central bank has hiked rates this much.
In March, it ramped up its benchmark borrowing rate for the first time since late 2018, increasing it by a quarter-percentage point.

The central bank cited high inflation, as well as the strong labor market in its post-meeting statement.

Americans are struggling with rising costs everywhere from the grocery store to the gas pump. And with the Russia-Ukraine conflict still raging, price pressures on food and energy are unlikely to abate any time soon.

“The implications for the US economy are highly uncertain,” the Fed statement said. “The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity.”

The bank also warned that the pandemic-related lockdowns in China will likely weigh on already battered supply chains.

As of June, the Fed will also start rolling off its massive balance sheet, which got bloated during the pandemic. It will let $30 billion worth of Treasury securities and $17.5 billion worth of mortgage-backed securities run off every month between June and August, before upping these amounts to $60 billion and $35 billion, respectively, in September.

This is a developing story. It will be updated.

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Arindam

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