Federal Reserve’s interest rate hike is the biggest in over two decades

“I know that families all across America are hurting because of inflation,” said President Joe Biden, who urged the Federal Reserve to tame price increases in a speech the day before new data is expected to show consumer prices still rising at more than an eight percent pace. “I want every American to know that I am taking inflation very seriously and it is my top domestic priority.”

The US central bank announced its biggest interest rate increase in more than two decades as it seeks to achieve maximum employment and fight against fast-rising prices by holding inflation at the rate of two percent.

The Federal Reserve last week said it was lifting its benchmark interest rate by half a percentage point, to a range of 0.75 percent to one percent, following a smaller rise in March, but with inflation at a 40-year high, additional interest rate hikes are expected.

“Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong,” said a statement from the Federal Reserve. “Job gains have been robust in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”

“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain,” said the statement. “The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.”

The push marks the latest effort to contain spiking costs being felt by households around the world.

Biden told Americans that he understands their plight and that he is working with the Federal Reserve to solve inflation with the release of oil from strategic petroleum reserves and putting pressure on companies with record-high profits to lower prices.

“They’re frustrated,” Biden said of Americans paying more for goods and services across the board. “I don’t blame them.”

According to a recent Reuters/Ipsos poll, fewer than half of U.S. adults – 42 percent – approve of Biden’s handling of the presidency and they rate the economy as the country’s most important problem, but Biden blamed the inflation spike on the COVID-19 pandemic, supply chain issues and Russia’s war on Ukraine.

Republicans and some economists have said government spending during the coronavirus pandemic fueled inflation, but very few politicians have called out greedy corporations for price gouging and those that have spoken do little to stop it.

Consumer advocates claim that companies are jacking up prices by more than is required to offset rising costs, padding their profits while using supply snags as cover.

“Corporate greed is motivating large companies to use the pandemic and supply chain issues as an excuse to raise prices simply because they can. And a lot of executives brazenly boast to investors about raising prices on consumers without consequences—and these executives are saying they’re going to continue to do so,” said Rep. Frank Pallone (D-N.J.) during a House Energy and Commerce committee hearing.

American consumers have experienced “unconscionable price hikes” in everyday consumer goods, added Janice Schakowsky (D-Ill.). “We are at war with this pandemic, war with this virus. And during World War II, war profiteers were held accountable. The same should be applied here today.”

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