The U.S. Federal Reserve stepped up its fight against inflation by raising its key interest rate by three-quarters of a percentage point – its largest increase in nearly three decades – and signaling that further major hikes will occur, which could increase the risk of recession.
The central bank’s decision, announced at the end of its last two-day meeting, will raise the benchmark short-term interest rate, which affects several consumer and business loans, to the range between 1.50% and 1.75%.
The Fed is increasing its efforts to tighten credit and slow growth because annual inflation hit 8.6%, a four-decade high, to spread to more parts of the economy, showing no signs of slowing down .
Americans are beginning to expect the period of high inflation to last longer than they previously believed. This sentiment could install an inflationary mindset in the economy, further complicating efforts to bring price inflation back to the Fed’s preferred 2.0% level.
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