U.S. Fed hikes key interest rates by 0.75 percentage point, biggest since 1994

The U.S. Federal Reserve (Fed) has announced on Wednesday its biggest hike in interest rates since 1994, a move aimed to curb the soaring inflation and the shadow of recession hanging over the country.

“Overall economic activity appears to have picked up after edging down in the first quarter.” Fed said in a statement after a two-day meeting. However, it warned that “inflation remains elevated”, and the invasion of Ukraine by Russia had created “additional upward pressure on inflation and [is] weighing on global economic activity. In addition, Covid-related lockdowns in China are likely to exacerbate supply-chain disruptions.”

“The committee is highly attentive to inflation risks.” the Fed statement added.

The bold move came after more bad news on price hikes late last week that sent U.S. stock markets into a tailspin, leaving the Fed and the Biden administration with a mounting crisis amid fears that runaway inflation has now spread through the economy.

At the start of the coronavirus pandemic, the Fed cut rates to near zero as the U.S. and global economies effectively shut down. It hiked rates for the first time since 2018 in March this year, but the increase did nothing to tamp down the price increases.