Andrew
THE US Federal Reserve on Wednesday hiked interest rates to their highest point in 15 years, signaling that the central bank’s battle against inflation is far from finished.
The Federal Open Market Committee voted to raise the overnight rate of borrowing by half a percentage point, continuing in the most aggressive rate raising cycle in 40 years.
However, the half-point increase was smaller than the last four rate hikes, which were 0.75-point increases.
That begs the question of whether the Fed will raise rates by smaller amounts going forward, if the central bank continues to follow the same course.
The Dow Jones Industrial Average took a nosedive on the news, falling nearly 500 points just after the afternoon announcement, but later slightly rebounding.
Indeed, the US economy has been dogged by the worst inflation since the early 1980s, which has prompted the central bank’s aggressive moves.
The rate increases risk causing a recession, and many economists predict a mild downturn in next year’s second half.
Inflation has been stubborn, demonstrated by Tuesday’s Consumer Price Index, which showed that food prices continue to rise, putting a strain on the wallets of millions of families that struggle to make ends meet.
Prices of food, already at historic highs, increased 0,5 percent in November from the previous month. Food prices climbed a whopping 10,6 percent from the same time last year.
The cost of gasoline has dropped somewhat from earlier highs, although it remains significantly higher than before the inflation crisis. – Xinhua
Bongani Ndlovu
Online Reporter