The US Federal Reserve yesterday continued its battle against inflation by raising the benchmark interest rate to the highest level in 15 years.

The overnight borrowing rate has gone up by 0.5%, taking it to a targeted range between 4.25% and 4.5%.

Forecasts from the Federal Reserve showed the bank's key interest rate could stand above 5% a year from now.

But the BBC says policymakers are starting to move more cautiously, following signs that the most severe inflation in decades may be starting to ease.

Yesterday's rise was smaller than in recent announcements.

Federal Reserve Chairman Jerome Powell said the bank wanted to slow down to see how the economy is responding to the cumulative impact of the hikes,

Global shift

The bank's moves are being closely watched around the world as the US drives a global shift to higher borrowing costs after years of low interest rates that followed the financial crisis.

The United Arab Emirates and Saudi Arabia were among the countries to increase borrowing costs on Wednesday, citing the Fed.

The UK interest rate is expected to be increased again by the Bank of England tomorrow as the cost of living soars.

The benchmark rate stands at 3% and is widely forecast to go up to 3.5% following the latest meeting of the monetary policy committee.

It would be the ninth consecutive hike since December 2021. The rate is already at its highest level for 14 years.

The impact of a rate rise would be felt by borrowers and savers across the UK.

Biggest single increase for decades

At its November meeting, the Bank increased its benchmark rate from 2.25% to 3% - the biggest single increase since 1989.

The BBC says more rate rises are likely to come. Analysts suggest the rate could reach 4.5% by the middle of next year.

However, that peak is lower than predictions had suggested when the government was in turmoil after its mini-Budget was badly received.

FTSE 100

The UK's top share index, the FTSE 100, fell 38 points to 7,457 shortly after opening this morning, following yesterday's six-point loss.

Brent crude futures were 0.79% lower at $82.05 a barrel.

Companies reporting today

  • Half-year results: Biffa, Currys
  • Trading update: Serco Group

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