US Federal Reserve raises ‘interest’ rate by 0.25 pct

WASHINGTON, March 23, (Agencies): The US Federal Reserve (Fed) raised Wednesday its benchmark interest rate by an additional 0.25 percentage point, lifting the target range to 4.75 to 5 percent as inflation remained high.

In a press statement, the Federal Open Market Committee (FOMC), in charge of policy setting, said it seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.

“In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-3/4 to 5 percent,” it argued.

It pointed out that the recent indicators point to modest growth in spending and production.

“Job gains have picked up in recent months and are running at a robust pace; the unemployment rate has remained low. Inflation remains elevated,” it noted.

The FOMC assured that the US banking system is sound and resilient.

It, however, admitted that recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.

“The extent of these effects is uncertain,” the committee, vowing that it remains highly attentive to inflation risks. It added that the Committee will closely monitor incoming information and assess the implications for monetary policy.

It reaffirmed strong commitment to returning inflation to its 2 percent objective.

The FOMC anticipated that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.

“In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” it unveiled.

The Committee stated that it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.

In assessing the appropriate stance of monetary policy, the Committee said it will continue to monitor the implications of incoming information for the economic outlook.

It stressed that it would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.

“The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures

and inflation expectations, and financial and international developments,” it clarified.

The Bank of England is focusing on inflation, announcing an 11th consecutive interest rate increase despite concerns about the economic fallout from troubles in the global financial system.

Britain’s central bank boosted its key rate by a quarter-percentage point

to 4.25% on Thursday, a day after the U.S. Federal Reserve approved a similar move to tame inflation that is crimping household budgets and slowing economic growth.

The decision came after the U.K. statistics agency surprised policymakers Wednesday by reporting that inflation accelerated to 10.4% in February, driven by the cost of food, clothing and

dining out.

Before the figures were released, many analysts had expected the Bank of England to keep rates on hold because of concern about turmoil in the global financial system following the collapse of two U.S. banks and the ensuing troubles at Switzerland’s Credit Suisse, which forced a hastily arranged takeover by rival UBS.