In its fight against chronically high inflation, the United States Federal Reserve has raised its interest rate by a substantial three-quarters for a third straight time, which is an aggressive speed that is increasing the risk of a recession.
This move by US Federal Reserve boosted its benchmark short-term rate that affects many business and consumer loans that ranges from 3 percent to 3.25 percent, which is the highest level since 2008. The policymakers of the United States also signalled that, by early 2023, they are expecting to have further increase in interest rates much higher than they had projected in June 2022.
The action by the Central Bank followed a government report that showed high costs spreading broadly throughout the economy, with price increases for rents and several other services. Although some previous drivers of inflation have been eased.
By increasing borrowing rates, the US Federal Reserve makes it costly to take out a mortgage, business or car loan. Officials of US Federal Reserve said that they are seeking a soft landing, by which they will manage to decrease growth to tackle inflation.
The US Federal Reserve is now envisioning and will make a recession likelier in 2023 by sharply increasing the cost of loans and mortgages.