Policymakers continue to believe that inflation will gradually return to the Fed’s two percent target.
Washington:
The Federal Reserve raised its lending rate by half a percentage point on Wednesday in its ongoing effort to contain the highest inflation rate in four decades.
After rising a quarter-point in March, the Federal Open Market Committee (FOMC) of the US central bank pushed interest rates above 0.75 percent as it tightens further policies to cool the economy, saying that more “will be appropriate” raises.
Policymakers continue to believe inflation will gradually return to the Fed’s two percent target as it raises borrowing costs, but will be “very alert to inflation risks,” the FOMC said in a statement following its two-day meeting.
The committee also noted the “highly uncertain” impact of external factors, including the Russian invasion of Ukraine, which are “creating additional upward pressure on inflation and are likely to weigh on economic activity”.
In addition, Covid lockdowns in China are “likely to exacerbate supply chain disruptions,” the statement said.
The FOMC also said it would begin reducing its massive bond holdings from June 1, starting at a pace of $47.5 billion a month, and then doubling after three months.
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