The United States Federal Reserve (Fed) announced on Wednesday a 0.75 point hike in official interest rates, the largest increase in 28 years, to counter runaway inflation.
With this hike – the third since the Fed started raising rates in March – the official interest rate of the world’s largest economy falls to a range between 1.5% and 1.75%.
In an official statement at the end of their two-day meeting, the Board of Governors of the Federal Reserve system also announced that it expects to implement more rate hikes in the future.
This is the largest rate hike since 1994, when Democrat Bill Clinton was in charge of the White House and the Fed was led by the historic Alan Greenspan.
On the other hand, the Fed announced that it will continue to reduce its US government debt portfolio, which consists mainly of Treasury bills and securities backed by mortgage loans.
Currently, the central bank has accumulated about $9 trillion in US debt.
As in June, the Fed will discharge $30 billion in Treasury bills and $17.5 billion in mortgage-backed securities each month in July and August.
As of September, these monthly figures will climb to $60 billion and $35 billion respectively, with the process ending when levels deemed “slightly above” are reached if the bank considers “ample reserves.”
“The commission is strongly committed to the goal of reducing inflation to 2%,” the Federal Reserve said.
Last Friday it was announced that inflation in the United States had risen to its highest level in 40 years, at 8.6%, in May, a new escalation in consumer prices, mainly driven by the sharp rise in energy prices.
Just a day later, on Saturday, the price of a gallon of gasoline (3.78 liters) at gas stations across the country hit $5, an unprecedented figure.
Source: El heraldo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
