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The Federal Reserve on Wednesday raised interest rates by three-quarters of a percentage point as it continued to battle the worst outbreak of inflation in 40 years, but signaled future increases in borrowing costs could be made in smaller steps to account for the "cumulative tightening of monetary policy" it has enacted so far.
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The policy decision set the target federal funds rate in a range between 3.75% and 4.00%, the highest since early 2008. The US central bank has raised rates at its last six meetings beginning in March, marking the fastest round of rate increases since former Fed Chair Paul Volcker's fight to control inflation in the 1970s and 1980s.
Why it matters
The Fed’s move comes as governments around the world are struggling with a surging cost of living crisis. Soaring food prices have pushed inflation over 10% in the UK and on Thursday the Bank of England is expected to raise its base rate by as much as one percentage point to 3.25%. Last month, the European Central Bank also increased its cost of borrowing to tackle inflation, now at a record high of 10.7%.
