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Fed to raise interest rate again amid core inflation pressure

03 May 2023 10:45 (UTC +04:00)

The US is braced for an interest rate rise on Wednesday that could push the world’s largest economy into recession, APA reports citing The Guardian.

The Federal Reserve is expected to announce another quarter of a percentage point rise in its benchmark interest rate, to a range of 5% to 5.25%. It would be the central bank’s 10th consecutive rate rise as it prioritises the fight against rising prices. A year ago interest rates were close to zero.

Headline annual consumer inflation fell in the US in March, to 5% from 6%, but core inflation – which does not include volatile energy and food prices – edged up to 5.6% from 5.5%.

Economists are divided on whether the Fed should stop raising rates. Adam Posen, who runs the Peterson Institute thinktank in Washington DC, said it was important for the US central bank “to continue its hiking cycle given what the latest data is telling us”.

US economic growth slowed sharply in the first quarter of the year, to just 1.1% year-on-year, from 2.6% growth in the final three months of 2022. It was significantly less than the economists’ expectations of 2% growth.