Fed Raises US Interest Rates To Highest In 16 Years

The US central bank has raised interest rates to the highest level in 16 years as it battles to stabilize prices.

The Federal Reserve increased its key interest rate by 0.25 percentage points – its 10th hike in 14 months.

The Fed signalled that Wednesday’s rise may be it’s last one for now.

The moves have pushed its benchmark rate to between 5% and 5.25% – up from near zero in March 2022.

Higher rates have sharply raised borrowing costs across the world’s largest economy, spurring a slowdown in sectors such as housing and playing a role in the recent failures of three US banks.

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Federal Reserve chair Jerome Powell said at a press conference after the announcement, that while the government was no longer saying that they anticipated additional interest rate increases as this was significant enough, however, they will be driven by incoming data.”

The bank started raising interest rates aggressively last year as prices in the US were soaring at the fastest pace in decades.

Central banks around the world, including in the UK and in Europe, have taken similar action.

Higher interest rates make it more expensive to buy a home, borrow to expand a business or take on other debt. By increasing those costs, officials expect demand to fall and prices to cool off.

Since the Fed started its campaign, price increases in the US have shown signs of moderating.

In March, inflation, the rate at which prices rise, stood at 5% – the lowest level in nearly two years – though still uncomfortably high for the Fed, which is targeting a 2% rate.