The U.S. central bank did what was widely expected to do on Wednesday, raising its benchmark lending rate by three-quarters of a percentage point as it steps up its battle to contain rampant inflation.
The Federal Reserve raised the upper bound on its benchmark interest rate — known as the federal funds rate — to 2.5 percent.
That matches the Bank of Canada’s interest rate after Canada’s central bank raised it by a full percentage point earlier this month.
After cutting interest rates in the early days of the pandemic, central banks around the world have recently begun aggressively raising lending rates to deal with inflation, which has hit its highest point in decades.
The official US inflation rate topped nine percent last month, while Canada’s is currently over eight percent.
The U.S. federal funds rate is now at the highest point reached in the previous economic cycle, said Desjardins economist Royce Mendes, adding that the central bank’s decision made it clear that fighting inflation is the Fed’s top priority, although there signs that it may have already peaked and a recession may be looming.
“This still looks like a central bank that is very focused on fighting inflation even in the face of a weakening core economy,” Mendes said.
Federal Reserve Chairman Jerome Powell will have more to say about the bank’s line of thinking at a news conference Wednesday afternoon.
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