Policy interest rate in US increased by 0.25 percent

Washington/New Delhi (Best Hindu News): The US central bank Federal Reserve on Wednesday announced an increase in the policy interest rate by 0.25 percent, slowing down the pace of interest rate hike in the ongoing fight against inflation. After the bankruptcy of some banks including Silicon Valley Bank in the US, the market was already anticipating that the Federal Reserve would now reduce the pace of raising interest rates. The market was assuming that the Federal Reserve’s Open Market Committee would increase the limits this time by only a quarter of a percent.

Before the crisis in the banks, it was estimated that the Federal Reserve could increase the interest rate by 0.5 percent this time too. After the latest hike, the policy margin in the US has widened from 4.75 per cent to 5.00 per cent.
Commercial banks feel that by the end of this year, the policy interest rate in the US can be increased from 5.1 percent now to 5.25 percent. Due to the increase in the interest rate by the Federal Reserve, the market price of government securities in the US market has come down significantly, due to which the banks investing in them are facing huge losses. There is a danger of drowning of many small banks.

The Federal Reserve’s statement said that further increases in the policy interest rate may be needed to calm inflation. The statement said the Federal Reserve’s Open Market Committee will look at upcoming data and assess the impact of policy decisions.

The Committee feels that the policy may have to tighten further to adequately curb inflation.
The Federal Reserve has expressed a commitment to keep inflation around 2 percent, which went much higher due to increased liquidity due to the monetary and fiscal stimulus package implemented at the time of Kovid-19, and it is now in the range of 6 percent.
The statement said that America’s banking system is strong and combative. The Federal Reserve’s policy rate level is at its highest since 2007.