US Fed raises key interest rate by 50 basis points

The US Federal Reserve yesterday raised its benchmark short-term interest rate by 50 basis points, or half a percentage point, to tackle the country’s worst levels of inflation in 40 years.

It is the Federal Open Market Committee’s most aggressive move in two years.

The UAE Central Bank raised its base rate by the same amount, applicable from today.

The increase in the Fed’s key rate raised it to a range of 0.75 per cent to 1 per cent. The committee said it would consider further large rate increases in the future.

American food and petrol prices have risen as inflation reached 6.6 per cent last month, its highest in four decades.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures,” the committee said. It hopes to return inflation to 2 per cent.

“No surprise in the Fed’s decision,” Naeem Aslam, of Ava Trade, told The National.

“The fact that this was already anticipated by the markets has calmed some nerves.”