The US Federal Reserve Bank has increased its interest rate by 0.5%, the largest increase in 20 years.
Federal Reserve chair Jerome Powell warned of disruptions to the economy from both the impacts on oil from the Russian invasion of Ukraine and the supply chain from China’s ongoing COVID-19 lockdowns.
Powell cautioned that uncertainties meant more surprises could be in store for the US economy.
“The Fed’s monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people,” Powell said.
The chair continued: “We therefore will need to be nimble in responding to incoming data and the evolving outlook. And we will strive to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain time. We are highly attentive to inflation risks. The Committee is determined to take the measures necessary to restore price stability.”
The press conference announcing the news opened with Powell addressing the American people directly, acknowledging the difficulties faced by the average person in light of rising inflation.
“We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses. The economy and the country have been through a lot over the past two years and have proved resilient. It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all,” the chair said.
Powell stated the goal of the Federal Reserve Bank will be to bring inflation down to 2%.
Domestically, the Reserve Bank of Australia (RBA) increased its cash rate from 0.1% to 0.3%, as reported in The Mandarin.
Like RBA governor Philip Lowe, Powell pointed to the US low unemployment rate as a positive sign for the economy.