The Federal Reserve (Fed) raised interest rates in the United States by 0.75 percentage point again on Wednesday. The policymakers of the US umbrella organization of central banks believe that this tough intervention is necessary to bring inflation under control.
Mid June increased the Fed also raised interest rates by 0.75 percentage point. The central bank has not raised interest rates so quickly since the early 1980s.
With increasing interest rates, it becomes more expensive for individuals and companies to borrow money. This means that less money is spent and the demand for goods decreases. Prices will then rise less rapidly, causing inflation to decrease.
The high inflation is partly due to the increased fuel prices due to the war in Ukraine. Foods have also become more expensive, causing many American households to see their purchasing power decline.
Consumer confidence has fallen to an all-time low
Consumer economic confidence in the US has meanwhile fallen to an all-time low. Fighting inflation is his administration’s top domestic priority, according to President Joe Biden.
Equity markets barely reacted to the rate hike, as it was in line with expectations. The dollar declined slightly in value against the euro.
Later on Wednesday, Fed President Jerome Powell will comment on the interest rate decision.
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