The US Federal Reserve warned during the previous raise earlier this year that it planned to continue increasing the interest rate throughout the year to fight historically high inflation in the country that has started to severely affect ordinary people’s budgets.
The Federal Reserve raised interest rates by 75 points, bringing its value to between the 1.5-1.75% range. This is the third time the Fed has raised rates this year, and is the biggest one-time increase in 28 years since 1994.
By increasing interest rates and trying to slow down the overheated economy, the Fed is looking to reign in inflation that reached 8.6% year-on-year in May, continuing its rise compared to April values of 8.3%.
Following the previous decision to raise interest rate, Fed Chairman Jerome Powell warned that it was not the last increase, and that the regulator will likely up rates several times throughout 2022 until inflation starts to drop. The members of the Fed’s Open Market Committee have offered different predictions regarding what interest rate will look like by 2023, varying between 2.75% and 4.5%.
The Fed raised the rate in March for the first time since December 2018 and after a long period of keeping it extremely low. The regulator even reduced it to 0-0.25% in 2020 to aid the stagnating economy due to the coronavirus pandemic.
Rapid economic restoration and growth that followed in 2021 brought about the first signs of anomalous inflation in November 2021. Similar phenomena were witnessed in other countries as well, including in the UK and the EU. Amid criticism of being unable to deal with the issue, US President Joe Biden routinely blames the Russian special operation in Ukraine and President Vladimir Putin personally for flaming high inflation in the US.