US Federal Reserve Rate Hike: Interest rates jump by 75 basis points, know impact on India

US Federal Reserve Rate Hike: The US Federal Reserve on Wednesday raised interest rates by 0.75 percent. This is the biggest growth rate since 1994. The Federal Reserve has taken this decision to curb inflation. The decision will impact millions of US businesses and families.

Borrowing costs for home, car and other types of loans in the US will increase. US inflation has reached a four-decade high, according to data released in the US on Friday. In the US, the inflation rate in the month of May has reached 8.6 percent. The crisis on the Indian currency has deepened due to the increase in the interest rates of the US Federal Reserve. The dollar will strengthen due to the increase in interest rates, but due to this, the rupee can fall further.

Benchmark short-term rate will increase

Jerome Powell, the current chairman of the Federal Reserve Bank, said in a press conference, “We thought this meeting needed to take strong action, and that’s what we did.”

The emphasis is on the commitment of the central bank to bring inflation back to the federal target rate. Powell said the unemployment rate could be slightly higher as economic growth slows. Explain that after this decision, there will be an increase in the benchmark short-term rate, which can affect many consumers, business and loan holders.

The Federal Open Market Committee decided to bring down its benchmark funds rate level to a range of 1.5 per cent to 1.75 per cent, the highest level just before the start of the COVID pandemic in March 2020.

Significantly, federal officials have forecast unemployment to rise this year and next, which could reach 4.1 percent in 2024. According to some economists, this level will be at risk of recession. Jerome Powell has hinted at further hike in interest rates.

Trying to achieve 2 percent inflation

“We are no longer trying to induce a recession, but we are trying to achieve 2 per cent inflation,” Powell said. probability has increased. Let us tell you that the increase in interest rates will strengthen the dollar. Inflation has become a concern for voters ahead of the mid-term elections. The public’s view of the economy has soured. At the same time, President Joe Biden’s approval rating has weakened and the prospect of a Democratic loss in November has also increased.

Why is the US raising interest rates?

Explain that due to increase in the interest rate, all types of loans become expensive. Because of this, people spend less, which reduces both the demand and prices of goods in the market.

first published:June 16, 2022, 9:27 a.m.

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