US Central Bank Expected to Raise Interest Rates  

27 Jul

US Central Bank Expected to Raise Interest Rates  

The U.S. Federal Reserve is expected to impose a second major interest rate increase Wednesday in an effort to combat soaring inflation.

Observers say the central bank will likely announce an interest rate hike of three-quarters of one percentage point. The expected rate hike would be similar to one last month — the biggest boost in nearly three decades as the U.S. inflation rate soared to an annual rate of 8.6%, the highest in 40 years.

The U.S. economy has seen rising demand for goods and services among consumers as the global COVID-19 pandemic has steadily waned. But that has also led to the rising cost of most commonly used items, such as gasoline, food and clothing, as well as major items like cars, appliances and furniture.

The decision by the Federal Reserve to increase the interest rate consumers pay to borrow money is aimed at lowering such demand, which could help lower prices and bring inflation back down to the central bank’s target rate of 2% per year — but without pushing too far and causing a recession, which could lead to job losses and more economic pain.

All three major U.S. stock indices closed lower Tuesday after giant retailer Walmart cut its profit outlook and warned that rising prices of food and gasoline were prompting consumers to cut back on buying higher priced goods like electronics and clothes.

Some information for this report came from The Associated Press and Reuters.

SJ

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