US Fed raises key interest rate, says growth to be weak for 2 years

22 Sep '22

2 min read

Pic: Shutterstock

The US Federal Reserve (Fed) yesterday raised its key interest rate—which affects many consumer and business loans—by three-quarters of a point for a third straight time to a range of 3-3.25 per cent to beat inflation. Economic growth will be weak for the next few years and unemployment will rise, project Fed officials, who indicated higher rate hikes in future.

Higher rate hikes in future are expected to raise the risk of a recession. This is the highest hike since early 2008.

The Fed is expecting the jobless rate to reach 4.4 per cent by the end of next year, up from its current level of 3.7 per cent.

The benchmark rate would be raised to nearly 4.4 per cent by the year end, a percentage point higher than was projected in June—and further next year to about 4.6 per cent—the highest level since 2007.

The decision followed a recent government report that said inflation was spreading more broadly through the economy, with hikes in rents and other services worsening despite easing of some earlier drivers of inflation like gas prices.

Fed officials now see the economy expanding just 0.2 per cent this year, sharply lower than its projection of 1.7 per cent growth just three months ago. And sluggish growth below 2 per cent is expected from 2023 to 2025.

The central bank still expects core inflation to be 3.1 per cent at the end of next year, well above its 2 per cent target.

Fibre2Fashion News Desk (DS)

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