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U.S. central bank hikes interest rate again, up to 3.25%

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The US Federal Reserve has raised its benchmark interest rate by three-quarters of a percentage point in the latest move to preempt runaway inflation.

The central bank’s decision was in line with what economists had expected, but some thought the Fed could raise rates further.

Instead, the Fed raised the trend-setting rate by 75 basis points for the third time in a row. Fed rates are now at their highest since 2008, suggesting policymakers are far from done. The forecast was for June.

This aggressive interest rate move shows just how big a problem policymakers think inflation is. Inflation around the world has reached multi-decade highs in recent years, and central banks have taken various actions to contain it.

All things being equal, central banks raise interest rates when they want to cool an overheated economy, and lower interest rates when they want to stimulate borrowing and grow the economy.

In a press conference after the decision, Fed Chairman Jerome Powell made it clear that the U.S. central bank is not afraid to hold or raise interest rates for as long as necessary to keep inflation in check.

“We want to be very confident that inflation is back on track,” they said before considering cutting rates again.

Barry Schwartz, chief investment officer at Toronto-based Baskin Wealth Management, said the Federal Reserve would do its job of bringing down inflation without hurting the broader economy. said it would be difficult.

“The big danger is that the Fed will overshoot .

The Fed’s move will no doubt make it more expensive to take out mortgages and other forms of financing, cooling consumer spending in the process. It was the highest level in a year.

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