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US Central Bank Pushes Key Interest Rate Another Notch Higher
The Federal Reserve, the U.S. central bank, raised its benchmark interest rate by another quarter percentage point on Wednesday but signaled that it could pause further increases as it watches what effect a string of rate hikes has on controlling months of increasing consumer prices. The policymakers' action, its 10th straight decision to push rates higher, moves the benchmark rate to a range of 5% to 5.25%, a 16-year high. The increased rate is again likely to increase borrowing costs for consumers using their credit cards to buy everyday goods and big-ticket items and loan rates for businesses paying for supplies they need. In announcing the latest rate increase, policymakers said they would now watch to see whether further rate increases are necessary to curb inflation. U.S. consumer prices rose at an annual pace of 5% through March, which is down sharply from the 9.1% pace nearly a year ago but still well above the 2% goal that the Fed policymakers strive for. The Fed's wait-and-see stance is a shift in policy. For months, the Federal Reserve had said it assumed further rate increases would be needed. The policy-setting Federal Open Market Committee said in a statement, "In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments." "A decision on a pause was not made today," Fed Chair Jerome Powell told reporters. Despite the rising cost of spending for U.S. consumers, the world's largest economy has remained resilient in its recovery from the 2020 coronavirus pandemic. Employers have continued to add hundreds of thousands of jobs month after month and the unemployment rate remains at a five-decade low. Even so, three banks have failed in the last two months after bad decisions on investments by their managers and runs on deposits by their customers. Some economic analysts continue to predict the American economy will slip into a recession later this year but such ongoing predictions over the last year have so far proven wrong. The theory behind raising interest rates is it makes it more expensive for families and businesses to borrow and thus will curb economic growth and tame inflation. Higher borrowing costs slow both consumer spending and hiring by employers. The concern for Fed policymakers, however, is to not slow the economy too much, to push it into a recession. 

Full "Voice of America:News" article




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