U.S. central bank hikes interest rate again, up to 3.25%


The US Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point in its latest move to pre-empt hyperinflation.

The central bank’s decision was in line with what economists had been expecting, although some thought the Fed could raise more than that — a full percentage point.

Instead, the Fed raised its trend-setting rate by 75 basis points for the third time in a row. The Fed rate is now at its highest level since 2008, and policymakers are signaling that they are not done yet: Officials predicted they would raise the benchmark interest rate to nearly 4.4 percent by the end of the year, a full percentage point higher than they are. Was expected in June.

This bold trajectory of rates speaks to the extent of the problem policy makers think inflation is. Inflation rates have risen to multi-decade highs around the world in recent years, prompting central banks to take a range of measures to control it.

All things being equal, central banks raise their rates when they want to cool off an overheating economy, and lower their rates when they want to stimulate borrowing to grow the economy.

In a press conference following the decision, Federal Reserve Chairman Jerome Powell made it clear that the US central bank is not afraid to keep interest rates unchanged, or to go up, as long as inflation is required to be curbed.

He said they “want to be very confident that inflation will come back down” before considering another rate cut.

It will be difficult for the Federal Reserve to do its job of bringing down inflation without causing pain in the broader economy, says Barry Schwartz, chief investment officer at Baskin Wealth Management in Toronto.

“The big risk is that the Fed is going to exceed … by raising interest rates too quickly, too high, causing the economy to deteriorate,” he told CBC News in an interview on Wednesday.

The Fed’s move will make obtaining a mortgage or other forms of loans more expensive — and will undoubtedly reduce consumer spending in the process. The average 30-year mortgage rate in the US topped 6.4 percent last week, its highest level in 14 years.


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