US interest rates are now at their highest since the global financial crisis as the US central bank has once again mandated a hike in a bid to reduce inflation.
The Federal Reserve, known as the Fed, has mandated a 0.50 percentage point hike in interest rates.
The widely expected increase will mean more expensive loans for American mortgage holders and those paying off credit card debt.
Following the hike, US interest rates stand at 4.25% to 4.5%, up from 3.75% to 4% since last increase in November.
In the US, the interest rate is a range, rather than a single percentage – as in the UK – because the Fed isn’t authorized to set a specific number. Instead, a target rate is set as a guide for banks to follow.
The increase is less than four previous excursions by 0.75 percentage point, indicating that the Fed is slowing down in its fight against inflation.
It had embarked on the interest rate hike program to bring inflation to its 2% target.
That pace of rate hikes has slowed with inflation in the world’s largest economy it seems to slow down. Prices rose 7.1% in the year to November, the US Department of Labor announced on Tuesday, down from a 40-year high of 9.1% in June.
A similar decision on interest rates will be announced by Bank of England on Thursday. The Bank is also expected to raise the cost of debt in an effort to depress economic activity and curb inflation.
Central banks had been asked not to raise rates by the United Nations Conference on Trade and Development.
A worse recession than the one experienced after the global financial crisis could result from regulators tightening monetary policy and raising interest rates, he warned.
