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US banks raise prime rates following the steps of Federal Reserve Board

The condition of Wallstreet seems to be changed as the banks of US are increasing their lending rates. On Wednesday, US banks JPMorgan Chase & Co, Citigroup and Wells Fargo & Co made an announcement stating that they had raised their prime lending rates by 75 basis points to 4.75 per cent, to match the Federal Reserve’s rate hike. The Federal Reserve Bank raised its target interest rate by three-quarters of a percentage point. The raise is the highest by the US central bank since 1994.

Fed’s Announcement in a post meeting conference

Speaking of the Federal Reserve Board, CNBC reported, “Fed Chairman Jerome Powell said at his post-meeting news conference that “either a 50 basis point or a 75 basis point” rate increase at July’s policy meeting seems most likely. Wednesday’s 75 basis point move was the biggest hike since 1994. Sinking risk assets reflect investor concern that the Fed won’t be able to arrest roaring inflation without tipping the economy into a recession.” The top was immediately followed by the Swiss National Bank and the Bank of England.

Some of the unknown aspects related to to this step of The Federal Reserve Board

There are various unknown aspects of the Federal Reserve Board. These are:

  1. Fed wants To help manage rising inflation by lifting interest rates by 0.75 of a percentage point.
  2. Fed’s intention is to give the American economy a “soft landing” – slow inflation down to keep prices stable and avoid a recession.
  3. This can increase the value of the dollar and can bring a change in borrowing rates around the world and
  4. The impact of this step can effect the international consumers of US goods too because higher inflation rates push up prices in the global market.

This step of raising prime rates to fight inflation is an important as well as interesting activity to be observed in the field of finance. If the inflation doesn’t come under control the world can expect more such steps.

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