(Fed) The US Federal Reserve has embarked on gradual policy tightening by hiking the interest rates by a quarter percentage point or 25 basis points.
The benchmark rate will now be in the range of 0.25%-0.5% after the hike, increasing from the near-zero level that the central bank set since the start of the coronavirus.
The rate hike is the first increase in at least three years and comes in the wake of spiraling inflation, which has challenged growth.
Fed also indicated at more rate increases in each of its remaining six meetings in the year, targeting a consensus funds rate of 1.9% by the end of the year. The committee also expects more rake hikes in 2023 and none in 2024.
Fed Chair Jerome Powell hinted at further tightening, with a focus on balance sheet reduction starting in May. Powell said the officials are also keen on inflation and cost expectations, promising to take measures needed to restore price stability.
The committee pointed out that the Russia-Ukraine crisis had posed an uncertain outlook to the US economy. The officials expect the invasion to add extra pressure on inflation and impact economic growth, although Powell downplayed the likelihood of a recession.
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