The US Federal Reserve raises interest rates by another 0.25 percent

Federal Reserve Bank of Washington

The US Federal Reserve announced its new interest rate decision on Tuesday.

(Photo: Reuters)

Washington After a series of sharp interest rate hikes, the US Federal Reserve is taking a more cautious approach. It raised the key rate by just a quarter of a percentage point on Wednesday – to the new range of 4.50 to 4.75 percent.

This is the highest level of interest rates since November 2007. After a series of relatively aggressive interest rate hikes recently, some normalcy is returning to US monetary policy.

In December, the Fed only raised the key interest rate by half a point. Previously, it had boosted it four times in a row by 0.75 percentage points each time to break the wave of inflation.

Rate hike in line with expectations

The inflation rate fell to 6.5 percent in December from 7.1 percent in November. The sixth straight decline gives the central bank scope for a less aggressive monetary policy stance.

According to many experts, the peak in interest rates should be reached in the spring. With a view to the summer, fantasies of interest rate cuts are already circulating on the financial markets.

Fed Vice Chair Lael Brainard recently emphasized that although inflation has weakened recently, it is still high. Monetary policy must therefore remain sufficiently tight for some time so that the Fed’s target of an inflation rate of 2.0 percent can be achieved in the long term.

Observers also expected a similar message from Fed Chair Jerome Powell at his upcoming press conference from 8:30 p.m. German time.

More to come.

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