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In the News

US Federal Reserve raises interest rates by 0.75%

Graham Watson

28th July 2022

The US Federal Reserve has announced a sizeable increase in interest rates of 0.75% and a new target interest rate of 2.25% to 2.50%.

Whilst the move is designed (with an uncertain time lag) to rein in US inflation, the wider implications are a higher cost of borrowing for developing economies because of a strengthening of the dollar - and a commensurate rise in the cost of importing dollar-denominated commodities and even greater stresses for the global economy as a whole.

More than half of the world's goods are priced in US dollars, so when the dollar strengthens, then the price of imported food, energy and other commodities for many countries - high and low-middle income alike - tends to rise adding to cost-push inflation in these nations.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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