Adding Salt To The Injuries Of Americans, The U.S. Central Bank Hikes Interest Rates ‘Once Again’
2022 was not a great year for average Americans. Throughout the year, the economy plummeted, and the aftermath of the pandemic kept adding to it. Not only did Americans lose their jobs exponentially, but they also lived under the open threat of an anticipated looming recession. Now, there is one more thing that is adding salt to the injuries of average Americans: Rising interest rates.
On December 14, 2022, the U.S. Central Bank increased its key interest rates by 0.5%. The bank hinted that there would be more hikes in the key interest rates in the upcoming months. According to forecasts, the key interest rates of the U.S. Central Bank can hike up to 5% a year from now.
The chairman of the Federal Reserve, Jerome Powell, was the first one to comment on the recent hike. Although it is 0.5% in the key interests of the U.S. Central Bank, it is still historically high, he said. Furthermore, the chairman hinted that Americans would see more hikes in interest rates in the upcoming months.
However, it is essential to note here that this latest hike is setting a historical target for Federal Reserve. Currently, the target benchmark for Federal Reserve is 4.25% – which is the highest milestone for Fed in the last two decades. In other words, the Fed’s benchmark was not that high in the last 20 years – as it is today, after the recent interest hike from the U.S. Central Bank.
Following the hike in interest rates by the U.S. Central bank, banks across the world are following the same move. The Bank of England, for instance, announced a similar 0.5% hike in the cost of borrowing. Announcing “the longest recession on record,” the Bank of England expects to increase its interest rates in the upcoming months. Similarly, the European Central Bank is also expected to make the same move.
Among Arab countries, Saudi Arabia and the United Arab Emirates are also citing Fed after increasing their borrowing rates.
All these lead to the fundamental question: Is inflation improving globally? Well, the good news is that it is!
Commenting on the improvement in inflation, Powell said that this is just the tip of the iceberg. Although consumer prices are 7.1% high in the U.S., they are still better than the 7.7% in October. Looking at these numbers, the chairman showed optimism that better days are ahead. With this “tiny little improvement” in the inflation rate throughout the U.S., the bank sees a potential improvement in inflation in 2023, Powell said.
However, it is essential to note here that although the latest hike is “smaller” than the previous announcements of the U.S. Central Bank, it is still adding salt to the injuries of average Americans.
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