Federal Reserve Raises Interest Rates To 16-Year High

The Federal Reserve increased its short-term key interest rate on Wednesday by 0.25 percentage point.

The Fed has increased the benchmark interest rate 10 times since March 2022 when it began its rapid campaign to combat inflation.

The rise in increase rate now stands at a 16-year high from 5% to 5.25%

Jerome Powell has argued consistently that the central bank must prioritize lowering inflation first. Inflation hit a record high of 40 years after the Covid-19 pandemic.

In march the annual inflation rate dropped to 5% from its peak of 9.1% in June and its lowest rate since 2021. 

Inflation has uninterruptedly declined over the last few months but remains well above the Fed's target rate of 2%. 

The consumer spending that accounts for 70% of the GDP increased by an impressive 3.7%, but has slowed down since January's weather-related spike.