May 29, 2022

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Sharp interest rate hike in US

Sharp interest rate hike in US

After Wednesday’s increase, the US policy rate will be 0.75 to 1 percent.

In addition, the central bank plans to cut its bonds until June. This is also a measure to reduce inflation.

At a news conference on Wednesday, central bank governor Jerome Powell said inflation was too high and the central bank would take action to reduce it. 0.5 percentage points opened the door to a higher interest rate.

It is customary for the interest rate to fluctuate 0.25 per cent at a time.

Corona crisis

In March, the US policy rate was raised by 0.25 percentage points. This is the first tariff increase in the United States after 2018.

Meanwhile, the world is plagued by corona epidemic, which triggered an economic crisis in 2020. The crisis has reduced interest rates to about 0 percent in the United States and many other countries.

Now it seems that the interest rate will continue to rise. The central bank expects an interest rate of 2.4 percent by the end of the year.

The highest inflation in 40 years

When the epidemic subsided and the economy opened up, it led to tremendous pressure on the world economy and so-called barriers.

As a result, inflation has risen. In the United States, the consumer price index rose 8.5 percent in the twelve months to March. Inflation is at an all-time high of 40 years.

At the same time, unemployment is at a 50-year low. This helps to raise wages in addition to price.

Ukraine war

The economic unrest resulting from the war in Ukraine has helped to raise inflation in many countries. Ukraine and Russia are two of the world’s leading agricultural producers, and global food prices are at an all-time high.

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In many countries, interest rates are rising. The Bank of England is expected to raise interest rates for the fourth time in a row on Thursday, while the Australian Federal Reserve is expected to raise interest rates for the first time in eleven years.

Norges Bank has signaled that interest rates will rise further in June. It is currently 0.75 percent.