US Fed hikes interest rates by 75 basis points for the fourth time

US Federal Reserve has hiked the interest rates by another 75 basis points, to a range of 3.75 percent to 4 percent. The reason for the Fed’s hawkish monetary stance this year is inflation. Addressing a news conference on Wednesday night, Fed Chairman Jerome Powell warned that taming severe inflation will likely require even higher interest rates. Fed officials expect the problem to linger into next year, that leaves open the possibility rate hike in the future also. The rate, which was near zero in March, has jumped 3.75 percentage points in the last eight months. The move was on expected lines as inflation continues to be high despite previous rate hikes. On September 21, the Fed increased the rate by similar percentage points.

The US has been reeling under decades-high inflation caused by a combination of factors. The inflation number for September came in at 8.2 per cent, over four times the target set by the Fed. In September, Fed chairman Jerome Powell had said that he was strongly committed to bringing inflation back down to 2 per cent. The Fed's rate-setting committee - Federal Open Market Committee - said that recent indicators pointed to modest growth in spending and production. It said job gains had been robust in recent months, and the unemployment rate had remained low. "Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the Fed said.The committee further said that Russia's war against Ukraine is causing tremendous economic hardship and the war and related events are creating additional upward pressure on inflation and are weighing on global economic activity.