US interest rates hit 14-year high in inflation battle

1 week ago 12

Federal Reserve chairman Jerome PowellImage source, Reuters

Image caption,

Jerome Powell, head of the Federal Reserve, says inflation in the US is too high

The US central bank has pushed interest rates to the highest level in almost 15 years as it fights to rein in soaring prices in the world's largest economy.

The Federal Reserve announced it was raising its key rate by another 0.75 percentage points, lifting the target range to 3% to 3.25%.

Borrowing costs are expected to climb more - and remain high, the bank said.

The move comes despite mounting concern that the cost of controlling inflation could be a harsh economic downturn.

Federal Reserve chairman Jerome Powell has said the rate rises are necessary to slow demand, easing the pressures putting up prices and avoiding long-term damage to the economy.

Banks in nearly every country - with the big exceptions of Japan and China - are taking similar steps as they wrestle with their own inflation problems.

The Bank of England is widely expected to announce its seventh consecutive rate rise at its meeting on Thursday, while Indonesia and the Philippines are among the other countries also poised for increases.

Analysts are starting to worry that the global sweep of the rate hikes, which ripple out to the public in the form of more expensive mortgages, loans and credit card debt, could lead to greater economic slowdown than policymakers expect.

"That is definitely one of the downside risks - that the synchronised nature of the tightening could make it that much more powerful," said Brian Coulton, chief economist at Fitch Ratings.

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