In view of the rapidly rising prices, the US Federal Reserve has raised the key interest rate more than it has in more than 20 years. The currency watchdogs around Fed boss Jerome Powell decided unanimously on Wednesday to increase the rate by half a percentage point to the new range of 0.75 to 1 percent. Experts had expected this aggressive step after the central bank had initiated the turnaround in interest rates in March with an increase of a quarter of a percentage point.
Experts are expecting a series of further strong increases in the coming months. The inflation rate in the US reached 8.5 percent in March, the highest level in over 40 years. This reduces the purchasing power of consumers, which can set off a dangerous wage-price spiral. The Fed is therefore under pressure to tighten the reins further.
In addition, the monetary authorities in Washington decided to gradually reduce the Fed’s balance sheet, which had grown to almost nine trillion dollars as a result of massive bond purchases, from June onwards. This withdraws liquidity from the financial markets.
Source: Nachrichten
