Fed raises interest rates to 5%

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The US Federal Reserve (Fed) raised the basic interest rate slightly again: 0.25 percentage points from 4.75 percent to 5.0 percent.

Last week, the Fed, like the European Central Bank, gave more weight to the fight against inflation than the dangers posed by the rise in interest rates for the banking sector. This small step was generally expected, but criticism came from the banking community as well. Because many US banks have invested their customers’ money in US government bonds. As interest rates rise, these bonds lose value.

The Fed has repeatedly increased interest rates by 0.75 percentage points over the past year, but slowed to half a point in December and a quarter point in early February. Inflation in the US was around 6 percent in February. In June 2022, this value was still 9.1 percent. Thus, the increase in the key interest rate was effective. But some observers consider it an exaggeration that interest rates rose from 0 percent to 5 percent in less than a year.

The Fed’s primary goal is to achieve price stability and full employment. When the Federal Reserve raises interest rates, it usually causes the dollar to rise in the foreign exchange markets.

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Source :Blick