The Federal Reserve (Fed) on Wednesday launched its biggest assault yet against spiralling inflation, raising the benchmark interest rate by three-quarters of a percentage point, the most aggressive hike since 1994. The Fed raised the target rate range for the federal funds rate by 75 basis points to 1.50 to 1.75 per cent.
As monetary policymakers drive their interest rates higher, they will make buying a home or expanding a business more expensive, restraining spending and slowing the broader economy.
The central bank expects growth to moderate in the coming months and years and predicted that unemployment will rise about half a percentage point to 4.1 per cent by late 2024 as tighter monetary policy dampens economic growth.
Meanwhile, industrial production in the eurozone increased in April, partly offsetting a decline from the previous month, as factories across the bloc continue to struggle with supply bottlenecks and high costs.
Industrial output in the countries that share the euro currency rose by a marginal 0.4 per cent month-on-month in April, partly reversing a 1.4 per cent fall in March, as the production of energy rose by 5.4 per cent, intermediate goods by 0.7 per cent, non-durable consumer goods by 0.4 per cent and durable consumer goods by 0.2 per cent, while production of capital goods fell by 0.2 per cent.
The small increase in industrial production in April leaves the industry vulnerable to a decline in the second quarter as supply chain issues and weakening demand hit the headlines again.
Finally, in Germany, inflation hit another all-time high, putting more pressure on the European Central Bank’s exit from the crisis-era stimulus after numbers from Spain also topped economists’ estimates. Germany’s inflation rate reached 7.9 per cent in May, according to data published by the German statistical agency Destatis.
May’s inflation was thus up by roughly one-tenth over the already record-breaking rate in the previous month. The report came just days before a crucial ECB meeting where officials confirmed plans to raise interest rates for the first time in more than a decade in July.
This article has been prepared by Bank of Valletta for general information purposes only.