The Federal Reserve (FED) on Wednesday raised its benchmark interest rate by 75 basis points for the second time in a row and said more increases will be needed in its ongoing battle to curb mounting price pressures.
This is the second straight increase of 75 basis points, and the fourth rate hike this year, as US central bank governors move aggressively to cool the strongest rise in inflation in more than four decades, to avert a recession in the world’s largest economy.
The Fed noted that the data showed “weak spending and production” despite the strong increase in job creation.
The goal of the Fed’s tightening policy is to make borrowing more expensive to slow consumption and relieve pressure on prices. The inflation rate also hit a record high in June, with 9.1 percent on an annual basis, a level not seen in more than forty years.
At its meeting in mid-June, the Federal Reserve’s Federal Open Market Committee approved a 75-basis point increase, the highest since 1994.
The US Central Bank indicated that it will not stop increasing its rates, or at least slowing its pace, until after inflation declines. Economists fear that the economic slowdown expected to lower prices will be very strong and lead to plunging the largest economic power in the world into recession.
Observers are looking forward to the release of the gross domestic product figures in the United States on Thursday, which, if negative, will indicate a technical recession after recording negative growth for two consecutive quarters.
Immediately after the Federal Reserve’s decision, a number of Gulf central banks announced a rate hike. The Central Bank of Bahrain said it decided to raise the lending rate by 75 basis points to 4.50 percent.
Meanwhile, the Central Bank of Kuwait announced raising the discount rate by a quarter of a percentage point to 2.50 percent.
Qatar’s Central Bank raised the lending interest rate by 50 basis points.
