The US Federal Reserve made a long-awaited announcement on increasing interest rates. The Bank raised the amount of interest by ½ percentage point for the first time in more than two decades. This means that it will become more expensive for people, business operators and governments to borrow money from banks.
At the Fed meeting on May 4, the Chair Jeremy Powell said that currently the labor market is tight and inflation is too high. He mentioned that the metric stays above the Bank’s goal of 2%.
The CB's monetary policy aims to address the economic issues. Increasing interest rates, Fed finds that increases in the target rate for the federal funds rate will be right. Powel also said that the Fed is beginning to decrease the size of its balance sheet.
With the latest increase, the target range for the federal funds rate now is between 0.75% and 1% in comparison with the existing range of 0.25% and 0.5%.
The rise is supposed to cool demand for goods and services and achieve stable prices. However, the economic environment is uncertain.
Powell said that the Fed will respond to further progress and take necessary measures by adapting its policy.
Prices of cryptocurrencies went up after the news. In the last 24 hours, Bitcoin increased by around 2% and currently trades at $39,500. Ethereum price went up by 2.4% and is hovering around $2,900.