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Home / Business / US Fed rate up 50 basis points

US Fed rate up 50 basis points

Inflation ‘remains elevated’ with the war in Ukraine and new coronavirus lockdowns in China threatening to keep pressure high
Jerome Powell
Jerome Powell
file Photo

Reuters   |   Washington   |   Published 05.05.22, 01:31 AM

The US Federal Reserve on Wednesday raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, and said it would begin trimming its bond holdings next month as a further step in the battle to lower inflation.

The US central bank set its target federal funds rate to a range between 0.75 per cent and 1 per cent in a unanimous decision, with further rises in borrowing costs of perhaps similar magnitude likely to follow.

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Despite a drop in US gross domestic product over the first three months of the year, “household spending and business fixed investment remain strong. Job gains have been robust”, the rate-setting Federal Open Market Committee said in a statement following the end of its latest two-day policy meeting in Washington.

Inflation “remains elevated” with the war in Ukraine and new coronavirus lockdowns in China threatening to keep pressure high, it said. “The Committee is highly attentive to inflation risks.”

The statement said the Fed’s balance sheet, which soared to about $9 trillion as the central bank tried to shelter the economy from the Covid-19 pandemic, would be allowed to decline by $47.5 billion per month in June, July and August and the reduction would increase to as much as $95 billion per month in September.

Policymakers did not issue fresh economic projections after this week’s meeting, but data since their last gathering in March have given little sense that inflation, wage growth or a torrid pace of hiring had begun to slow.



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