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US Federal Reserve to start rate hikes in March

US Federal Reserve to start rate hikes in March to curb rising inflation



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The Federal Reserve has indicated it will start raising interest rates in March to combat the red-hot inflation.

Referring to strong job data and a rise in the cost of living, the US central bank said it will “soon be appropriate” to end the era of ultra-low borrowing costs.

The benchmark interest rate is in the range of 0 percent to 0.25 percent. While the Fed has not released any new predictions on how often it would hike rates, traders expect “different” moves in 2022.

Tack: US Federal Reserve (pictured) said it will 'soon be appropriate' to end the era of ultra-low borrowing costs

Tack: US Federal Reserve (pictured) said it will ‘soon be appropriate’ to end the era of ultra-low borrowing costs

In December, officials signed three increases. US households are now experiencing the highest inflation rate in nearly 40 years. At 7 percent in December, it was the fastest rate of price increases since 1982.

Central banks usually raise rates when inflation overheats to encourage saving rather than spending. In theory, this should drive prices down.

But officials were hesitant to do so, fearing a surge could halt Covid’s economic recovery.

Experts also fear that an increase could deter companies from hiring. But the unemployment rate in the US has fallen to 3.9 percent, suggesting the economy could weather an uptick.

The Bank of England was the first major central bank to raise interest rates in the wake of the pandemic — from 0.1 percent to 0.25 percent in December.

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