Fed raises US interest rates to highest in 16 years

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Fed raises US interest rates to highest in 16 years

The US central bank has raised interest rates to the highest level in 16 years as it battles to stabilise prices.

The Federal Reserve increased its key interest rate by 0.25 percentage points – its 10th hike in 14 months.

The Fed signalled that Wednesday’s rise may be its last one for now.

The moves have pushed its benchmark rate to between 5% and 5.25% – up from near zero in March 2022.

Higher rates have sharply raised borrowing costs across the world’s largest economy, spurring a slowdown in sectors such as housing and playing a role in the recent failures of three US banks.

“We’re no longer saying that we anticipate” additional interest rate increases, Federal Reserve chair Jerome Powell said at a press conference after the announcement, calling it a “significant change”.

However, he refused to rule out further action, saying: “We’ll be driven by incoming data.”

The bank started raising interest rates aggressively last year when prices in the US were soaring at the fastest pace in decades.

Central banks around the world, including in the UK and in Europe, have taken similar action.

Higher interest rates make it more expensive to buy a home, borrow to expand a business or take on other debt. By increasing those costs, officials expect demand to fall and prices to cool off.