London Daily

Focus on the big picture.
Thursday, Jul 10, 2025

US interest rates increase at their sharpest rate since 1994 in bid to tackle soaring inflation

US interest rates increase at their sharpest rate since 1994 in bid to tackle soaring inflation

"We’re not trying to induce a recession," the Fed chairman said, while warning of more rate rises to come and projecting a slowing economy in the months ahead.
The US central bank has increased interest rates by three-quarters of a percentage point to combat inflation - the sharpest hike in 28 years.

The Federal Reserve signalled more rate rises to come and projected a slowing economy in the months ahead, along with growing unemployment.

This will make it costlier for people, businesses and governments to borrow - affecting credit card and mortgage payments.

The benchmark rate now stands at a range of 1.5% to 1.75%, levels that have not been seen since before the pandemic began.

Fed Chairman Jerome Powell stressed that the US economy was strong enough to handle the hike, saying: "We're not trying to induce a recession."

He had previously ruled out such a high increase but the unexpected spike in inflation last month - which many had hoped had peaked - forced the bank to change course.

Data published on Friday showed the US Consumer Price Index hit a 40-year high of 8.6% in May, one of the highest in the world.

In a statement, the Federal Open Market Committee cited the impact of the war in Ukraine and lockdown policies in China on soaring consumer prices.

Officials raised their forecasts for interest rates at the end of this year and next, expecting the median benchmark rate to climb to 3.4% by the end of 2022.

In March, that rate had been projected at 1.9%.

It is expected to reach 3.8% by the end of 2023, up from the March forecast of 2.8%.

The revision indicates that Fed officials expect inflation to last longer than they had before.

Mr Powell said he did not expect hikes of three-quarters of a percentage point to be "common".

The tightening of monetary policy was accompanied by a downgrade to the Fed's economic outlook, with the economy now seen slowing to a 1.7% rate of growth this year.

Unemployment is expected to increase to 3.7% by the end of 2022, hitting 4.1% in 2024.

Concerns about growing borrowing costs have prompted a sharp sell-off in bonds and stocks by investors, who anticipated Wednesday's interest rate rise.

The S&P 500 entered bear market territory on Monday, having fallen 20% from its peak in January.

Other countries are also hiking interest rates to combat inflation.

In the UK, the Bank of England is expected to increase its rate by 0.25% to 1.25% on Thursday.
Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
×