Interest Rates Increased By Fed To Fight Inflation

Bryan Dijkhuizen

To combat the worst inflation the United States has experienced in 40 years, the Federal Reserve announced a half-percentage point increase in interest rates on Wednesday.

This is the first time in 22 years that the central bank has raised interest rates by this much.

When it raised its benchmark borrowing rate in March, it did so for the first time since late 2018 and did so by a quarter percentage point.

From the grocery store to the petrol station, Americans are straining to keep up with growing expenses everywhere.

"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 cautioned that pandemic-related lockdowns in China would certainly have a negative impact on the country's already-fragile supply chains.

Inflation is affecting people all across the globe, and everyone is suffering the effects of rising energy prices and food prices in general. However, mortgages and normal loans, which are offered by banks, are growing more costly.

The only thing that could assist to keep people's purchasing power up is for the economy to develop and for the European Central Bank and the Federal Reserve to cease producing money to finance their operations.

Beginning in June, the Federal Reserve will begin to unwind its large balance sheet, which had become bloated as a result of the epidemic.

During the months of June through August, it will allow $30 billion worth of Treasury securities and $17.5 billion worth of mortgage-backed securities to mature monthly, before increasing these amounts to $60 billion and $35 billion, respectively, in September.

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