The US Federal Reserve and the European Central Bank have both raised interest rates to tackle inflation concerns, with the US seeing its highest level in 16 years. As the global economy grapples with elevated inflation, the central banks hope these measures will help stabilize prices and support economic growth.
Summary:
- US Federal Reserve raises key interest rate by 0.25 percentage points, reaching the highest level in 16 years
- Benchmark rate now between 5% and 5.25%, up from near zero in March 2022
- European Central Bank also raises rates by 0.25 percentage points
- US higher rates lead to increased borrowing costs, slowdown in sectors like housing, and recent bank failures
- Federal Reserve Chair Jerome Powell hints this might be the last rate rise for a while, but does not rule out further action
- US inflation in March at 5%, lowest level in nearly two years, but still above the Fed’s 2% target
- ECB does not hint at a pause in rate rises, as Eurozone inflation increased to 7% in April
As the world watches the impact of these interest rate hikes, it remains to be seen whether the central banks’ efforts will successfully curb inflation and ensure steady economic growth. Both the US Federal Reserve and the European Central Bank continue to monitor incoming data, signaling that they will respond as needed to maintain stability and avoid a potential recession.
