The US Federal Reserve’s decision to raise interest rates by three quarters of a percent on Wednesday—the biggest hike since 1994—was designed to rein in the country’s overheated economy and fast-rising inflation, which have led to price spikes market volatility.
The move to raise rates to a range of 1.5 percent to 1.75 percent caught industry pros by surprise; many had predicted another half-percent uptick from the one imposed in March.
However, the decision also immediately pushed stocks higher, as the S&P 500 ended the trading day Wednesday up 1.5 percent. The index, composed of 500 large companies listed on stock exchanges, had fallen into bear market territory days before, USA Today reported.
The Fed, led by chairman Jerome Powell, will likely keep increasing rates to slow inflation. By year’s end, the federal funds rate could end in a range of 3.25 percent to 3.5 percent and climb to 4 percent in 2023, according to the report, citing official estimates.
That’s a massive climb from the start of 2022, when the key rate was at near zero; the half-point increase in March represented the biggest gain in over twenty years, but the United States isn’t the only nation experiencing surging inflation.
Greece’s soaring inflation rate
The rising Greek inflation rate is likely due to price increases for goods and services in the country in general, particularly for energy. The cost of natural gas rose by 172.7 percent, the price of electricity jumped by 80.2 percent, and heating oil and fossil fuels experienced a 65.1 percent and 5.4 percent increase in cost, respectively.
Interest rate hike aimed at cooling borrowing and slowing inflation
The US Fed’s rate hike is aimed at cooling borrowing and softening any further jump in inflation. The economy has been on a roll with output increasing nearly 6 percent in 2021 as COVID-19 vaccinations took hold and the government pumped money into the pockets of Americans.
Growing demand, however, has led to massive price spikes, which officials thought would eventually subside but has only increased. Part of the problem can be attributed to Russia’s war on Ukraine, which has complicated supply chains and COVID-19’s Delta variant, the report noted.
Tech stocks have also taken a hit, and early Wednesday, Bitcoin had a rough time. The digital currency continued its drop to just over $20,000 (around 19,200 euros) in intraday trading before rising after that.
Bitcoin, nevertheless, has cratered from its all-time high of over $57,000 (about 54,700 euros) just seven months ago.