The Federal Reserve on Wednesday intensified its drive to tame high inflation by raising its key interest rate by three-quarters of a point — its largest hike in nearly three decades.
There are three factors that could lead to inflation which include demand-pull inflation, cost-push inflation and built-in inflation.The Federal Reserve on Wednesday intensified its drive to tame high inflation by raising its key interest rate by three-quarters of a point — its largest hike in nearly three decades — and signaling more large rate increases to come that would raise the risk of another recession.
The Fed’s three-quarter-point rate increase exceeds the half-point hike that Chair Jerome Powell had previously suggested was likely to be announced this week. The Fed’s decision to impose a rate hike as large as it did Wednesday was an acknowledgment that it's struggling to curb the pace and persistence of inflation, which has been worsened by Russia’s war against Ukraine and its effects on energy prices.
Expectations for larger Fed hikes have sent a range of interest rates to their highest points in years. The yield on the 2-year Treasury note, a benchmark for corporate bonds, has reached 3.3%, its highest level since 2007. The 10-year Treasury yield, which directly affects mortgage rates, has hit 3.4%, up nearly a half-point since last week and the highest level since 2011.
The Bank of England has raised rates four times since December to a 13-year high, despite predictions that economic growth will be unchanged in the second quarter. The BOE will hold an interest rate meeting on Thursday.
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