Washington: On Wednesday, the US central bank ‘Federal Reserve’ announced an increase in interest rates by half a per cent. After this announcement, the interest rate in the US reached 3.25%, the highest since 2008. While announcing this, the Federal Reserve also indicated that interest rates in the United States will be increased to 4.6% by 2023. The Federal Reserve’s announcement triggered strong reactions in international markets. The stock markets in Asia, Europe and the United States crashed and currencies’ values declined.
Inflation has flared up in the United States and the inflation rate is still above eight per cent. In August, the rate was recorded at 8.3%. After this increase, the head of the Federal Reserve, Jerome Powell, warned that the US people would have to bear the pain for some more time. It seems that Powell has made his statement a reality by increasing the rate for the third time in a row. This is the fifth increase in the rate by the Federal Reserve in the last seven months.
This decision of the Fed caused substantial repercussions on the international level. There was a big fall in the stock markets of the United States, Europe and Asia. Asian stock markets fell to two-year lows. It includes stock markets in Japan, South Korea, China and Hong Kong. Europe’s leading stock markets fell more than one per cent for the second day in a row. Major fluctuations in the US stock market indicate that some indices may crash.
After the stock markets, the currency market has also seen significant upheavals. The Japanese Yen hit a record 145 per dollar after the announcement of the interest rate hike. The central bank of Japan has managed to bring down the Yen level to 140 through massive intervention through foreign reserves. This marks the first time since 1998 that Japan’s central bank has intervened on a large scale through foreign reserves. The yen was followed by the British pound as well as the Euro. The value of the Euro fell below one per dollar.
The British pound has fallen to a 37-year low. After the rate hike by the US Federal Reserve, Switzerland and Norway in Europe also announced rate hikes. The Swiss central bank raised its interest rate by 0.75%. This is the second time in the last 15 years that such an increase has been made. Norway’s central bank raised half a percentage point. 
Bank of England is also likely to increase the interest rate in the next few days and it is estimated that this increase will be 0.75% to 0.80%.
While announcing the interest rate hike, the Federal Reserve has also signalled recession. However, the Fed said that to prevent inflation, interest rates will continue to rise and interest rates in the United States will be raised to 4.6% by next year. It is said that this will be the most significant increase in the history of the United States. However, economists warned that a substantial recession would hit the US economy due to this increase. The World Bank and the Monetary Fund have warned that the world economy will also go into recession if a recession hits the United States.
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