WASHINGTON — The Federal Reserve raised interest rates by a hefty half-percentage point Wednesday, the largest increase since 2000, in a bid to curb the worst inflation in four decades..
The move was widely expected and had been telegraphed by Fed officials in recent weeks, but it still sent a jolt through financial markets, with stocks and bonds falling sharply. The yield on the 10-year Treasury note, a benchmark for long-term interest rates, jumped to 3.2%, its highest level since 2018..
The Fed’s rate hike is the latest in a series of aggressive moves by central banks around the world to combat inflation, which has been fueled by a combination of factors including supply chain disruptions, the war in Ukraine, and strong consumer demand. The European Central Bank is expected to raise rates for the first time in over a decade next week, and the Bank of England is widely expected to follow suit..
The Fed’s rate hike is likely to have a significant impact on the U.S. economy. Higher interest rates will make it more expensive for businesses to borrow money, which could lead to slower economic growth. Consumers will also face higher interest rates on loans, which could reduce spending..
The Fed’s goal is to bring inflation down to its target of 2% without causing a recession. However, it is a difficult balancing act, and there is a risk that the Fed could raise rates too quickly and trigger a downturn..
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