The Federal Reserve raises rates by another 0.75%, but indicates it could be possible to cut further hikes for fear of slowing down
<!–
<!–
<!– <!–
<!–
<!–
<!–
The US central bank said it was prepared to slow down the pace of interest rate hikes in light of slowing economic activity.
When the Federal Reserve raised its key rate by another 0.75 percentage point, to a range of 3.75 to 4 percent, it hinted that future increases may be smaller.
But chairman Jerome Powell added that continued high inflation and historically low unemployment meant that the last point at which interest rates stabilized could turn out higher than expected.
Investors’ eyes then turned to the Bank of England, which made its own interest rate decision at noon today. An increase from 0.75 percentage point to 3 percent for the bank rate, as is officially known, was released 7 to 2 by the Monetary Policy Committee.
Inflation battle: Federal Reserve Chairman Jerome Powell (pictured) said the latest point where interest rates hit could be higher than previously expected
Powell said the “time is coming” when it would be appropriate to shift attention from the “historically fast” pace of increases, and look more closely at how high the base rate should go.
He noted that there is often a lag between Fed rate hikes, and this has an effect on the economy – implying that he was wary of going too far.
But inflation is still close to a 40-year high, and low unemployment is doing little to ease the rise in the cost of living.
Powell said: “Incoming data suggests the ultimate level of interest rates will be higher than previously expected.” Markets had previously seen US interest rates peak at 5 percent next year.
Central banks have raised rates to encourage savings and halt rising prices.
But this also slows economic activity, leaving the Fed with a tough decision every time its rate-setting committee meets.
The Bank of England faces a similar dilemma as it prepares for another rate hike today.
It is expected to opt for its own 0.75 percentage point increase, the largest since Black Wednesday in 1992, bringing its base rate to 3 percent.