By Stefan J. Bos, Chief International Correspondent Worthy News
The U.S. Federal Reserve announced it is boosting its benchmark interest rate by 0.75 percent.
The central bank’s move raised its key short-term interest rate to a range of 3.75 percent to 4 percent, its highest level in 15 years.
It was the central bank’s sixth rate hike this year which has made mortgages and other consumer or business loans increasingly expensive and raised the risk of a recession.
Wednesday’s rate push aimed to “cool the economy” to contain spiking costs felt by households in America and worldwide ahead of upcoming U.S. midterm elections that could see Democrats losing control over the legislature.
The announcement came as the White House on Wednesday deleted a controversial post on social media platform Twitter. The tweet took credit for senior citizens getting the most significant increase in their Social Security checks in 10 years “through President Biden’s leadership.”
Yet the remarks drew bipartisan condemnation for failing to acknowledge that the increase was linked to inflation rising at the fastest pace in four decades under President Joe Biden’s watch.
WHITE HOUSE REACTS
After Wednesday’s interest rate hike, Karine Jean-Pierre, the White House press secretary, said the Biden administration respects the independence of the Federal Reserve and its efforts to bring down inflation. “This is part of our transition to more stable and steady growth,” she added.
The S&P 500 stock index initially jumped after the Fed’s announcement, erasing losses from earlier Wednesday, but soon dropped to a loss of 2.5 percent for the day.
Jerome H. Powell, chair of the Federal Reserve, dashed investors’ hopes that an end to the central bank’s rate increases may soon be over.
Powell warned that with inflation rising, it was “very premature” to talk about pausing rate hikes, he said.
That prompted a sell-off in stocks while trading in government bonds was similarly upended, with yields rising in the late afternoon after falling earlier in the day.
“Woah! If you’re the kid in the back asking if we are nearly there yet and Dad says we have a ways to go, then you buckle in for a journey,” said Rob Waldner, chief fixed income strategist at Invesco. “I was struck by that,” he told the New York Times newspaper.
The two-year Treasury yield, which is sensitive to changes in Fed policy, ended 0.06 percentage points higher at 4.59 percent. It was a tiny bit of hope in an otherwise turbulent day for markets.