Fed Raises Benchmark Interest Rate

english.jpnn.com, AMERIKA - The United States Federal Reserve finally raised its benchmark interest rate for the first time since 2018 on Wednesday (16/3) local time.

This step was taken by the Fed to tame the highest US inflation in four decades.

The Fed said in a statement that inflation remains high, reflecting the supply and demand imbalance related to the pandemic, higher energy prices, and broader price pressures.

"The invasion [of Ukraine] and related events are likely to create additional upward pressure on inflation and weigh on economic activity," the Fed said.

The central bank decided to raise the target range for the Federal benchmark interest rate by a quarter of a percentage point to 0.25 to 0.50 percent and "anticipates that ongoing increases in the target range will be appropriate."

In addition, the central bank expects to begin reducing holdings of US securities and agency debt and agency mortgage-backed securities at the forthcoming meeting.

The target range for the federal funds rate was previously set near zero in March 2020 to stimulate the US economy at the start of the Covid-19 pandemic.

The central bank also started a program of unlimited bond purchases to prop up markets and reduce long-term borrowing costs. Now the Fed's balance sheet has swelled to nearly $9 trillion from around $4.5 trillion two years ago.