US Fed raised interest rates by 0.25%, 1st rate hike in over 3 years

17 Mar '22

1 min read

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The US Federal Reserve yesterday raised interest rates by 0.25 per cent and projected its policy rate would hit 1.75-2 per cent by the year end. Flagging the massive uncertainty the economy faces from the war in Ukraine and the pandemic, the central bank said ‘ongoing increases’ in the target federal funds rate ‘will be appropriate’ to curb the highest inflation in 40 years.

Dropping any direct reference to the novel coronavirus pandemic, the central bank’s statement cited the war in Ukraine as creating ‘additional upward pressure on inflation’ and weighing on economic activity.

Inflation is likely to be above the Fed’s 2 per cent target, remaining at 4.1 per cent through this year and dropping only to 2.3 per cent till 2024. Economic growth is forecast at 2.8 per cent this year, a sharp drop from the 4 per cent growth projected in December.

The unemployment rate is seen dropping to 3.5 per cent this year and remaining there next year, but is projected to rise slightly to 3.6 per cent in 2024.

The Fed expects to begin reducing its nearly $9 trillion balance sheet at a coming meeting.

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