Fed Rate Hike: The US Federal Reserve on March 22 increased the key interest rate once again. Fed’s Jerome Powell announced a quarter point-hike in interest rates amid high inflation and banking crisis. With this, the Fed has increased its funds target rate to a range of 4.75-5 per cent.
According to official updates, the US Federal Reserve refused to lower its guard as continued with the interest rate hike due to persistently high inflation. It also assured that even though there is a banking crisis, there is enough in store to prevent a contagion.
While the Fed rate hike was expected, the newly set funds target range has surprised some as the range of 4.75-5 per cent was last seen prior to the 2008 global financial crisis. In its statement, the Federal Reserve also noted that the “US banking system is sound and resilient” but whatever happened lately may “result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.”
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This round of US Fed rate hike also affirms the policymakers’ idea of increasing the key interest rates till inflation is brought under control. However, the Fed also assured that the broader banking sector is safe enough with adequate safeguards in terms of capital adequacy.
As per experts, the rate hike is once again expected to add to the cost of funds, where cost of living might zoom and mortgages may also see an impact. Some also believe that this increase would only add to the risk of a potential recession in a global economy that is already witnessing a downturn.
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