Washington/London: The US Federal Reserve has announced an increase in interest rates by half a percentage point. While making this announcement, Jerome Powell, the head of the Federal Reserve, also warned that interest rates in the United States may reach five percent by the end of 2023. After the Federal Reserve’s announcement, the Bank of England also announced an increase of 0.50 percent. Given these announcements, there has also been a fall in fuel prices in the US and Asia stock markets.

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In the last few months, there has been a recession-like environment in the global economy, and it is said that the increase in interest rates by the major countries of the world has been one of the main reasons. The US, Europe and other leading countries have consistently supported interest rate hikes on the grounds of curbing inflation. Jerome Powell also reiterated the same in the announcement made by the Federal Reserve on Wednesday. Besides, Powell said that rising rates of many components in the manufacturing and the services sector were still a problem, and the only option was an increase in interest rates.

After Wednesday’s announcement, interest rates in the US rose to 4.5 percent. This has become the highest interest rate in the US in the last 15 years. The new hike of half a percent has been the seventh rate hike in the previous nine months. Jerome Powell indicated that this rate increase would continue in the next year, but the growth rate would be less. Powell clarified that by the end of 2023, interest rates in the US might go up to 5.1 percent and, subsequently, might be reduced in 2024 and 2025. Moreover, the Federal Reserve head also warned that there would be no interest rate reduction unless there were concrete evidence that inflation would come down.

Within hours of the Federal Reserve‘s announcement, the UK’s Central Bank also announced an interest rate hike. The Bank of England has also increased the interest rate by half a percent, and the new rate will be 3.5 percent. This has become the highest interest rate in the UK in 14 years. The British Central Bank has consecutively announced a rate hike for the ninth time. In the UK, inflation has been at its highest level in 40 years, and the economy is said to be in recession. British people have been facing a ‘Cost of Living Crisis’. Against this background, the increase in interest rates will increase the interest rates on many other factors, including the house and will increase the difficulties faced by the common citizens; analysts expressed concern.

Moreover, repercussions of interest rate hikes announced by the US and the UK emerged in the international markets. Leading stock indices in the US and Asia fell sharply. Furthermore, crude oil and gold rates have also fallen, and some major currencies, including the Yen and Euro, have depreciated against the US dollar.

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