In an effort to keep rapidly growing prices under control, the US Federal Reserve is hiking interest rates for the first time since 2018.

The Federal Reserve of the United States announced a 0.25-percentage-point increase in its benchmark rate and hinted at more rate hikes in the months ahead.

The actions come as the economy faces increased uncertainties as a result of the Ukraine conflict and China’s coronavirus outbreaks.

They are predicted to have far-reaching global consequences.

The Fed will make borrowing more expensive for families, corporations, and governments by hiking rates.

It is hoped that this will reduce demand for products and services, easing price inflation in the United States, which reached a fresh 40-year high of 7.9% last month.

Federal Reserve Chairman Jerome Powell stated, “The aim is to restore price stability while maintaining a healthy labor market.” “That is our goal, and we believe we can do it, but first we must restore pricing stability.”

He stated, “We’re not going to allow high inflation get entrenched.” “The costs would be prohibitively expensive.”

According to Diane Swonk, chief economist at accounting firm Grant Thornton, the bank is attempting a “high-wire act.”

If you move too slowly, inflation will become entrenched, lowering your quality of life over time. If the Fed moves too quickly, it risks stifling both domestic and international growth.

“They want to reduce inflationary pressures without jeopardizing the global economy,” she argues.

The measures reflect a major policy change from the bank in charge of the world’s largest economy. Following the financial crisis of 2008, the Fed gradually raised interest rates before slashing them again when the coronavirus outbreak struck.

The rate hike announced on Wednesday was widely predicted, and it will bring the bank’s main rate goal range to 0.25 percent to 0.5 percent.

Officials expect the interest rate to climb to about 2% by the end of the year, according to projections issued following the Fed’s meeting – a full percentage point more than they expected in December.

In addition to raising interest rates, the Fed will reduce other forms of stimulus, such as the huge purchases of Treasury securities and other assets that it began to calm markets during the coronavirus outbreak.

And, while the bank has hiked rates in the past, it hasn’t seen inflation like this in decades.

“Raising rates to accommodate higher growth is no longer enough,” Ms Swonk argues. “Chasing inflation vs anticipating inflation is a very different proposition.”

Chairman of the Federal Reserve, Jerome Powell, said the US economy was well-positioned to manage the rises, rejecting worries of a recession.

At a news conference following the Fed meeting, he remarked, “The chance of a recession in the next year or two is not exceptionally significant.” “All indications point to a healthy economy that will be able to thrive, not just tolerate, but absolutely thrive in the face of less accommodating monetary policy.”

Officials at the Federal Reserve estimate the US economy to expand by 2.8 percent this year, with inflation falling to roughly 4.3 percent by the end of the year.

That is still significantly over the Fed’s 2% objective, prompting concerns that the bank is being too cautious.

The Bank of England has already hiked rates twice in the UK, where inflation touched 5.5 percent in January, and is set to do so again on Thursday.

Many other nations, such as South Africa, Brazil, and South Korea, have also taken action.

By delaying, the Fed has created additional uncertainty about how far it will have to hike rates and how soon it will have to do so to bring inflation under control, according to Maurice Obstfeld, an economics professor at the University of California, Berkeley.

That’s an issue, he adds, and it’s not limited to the United States.

“It’s not a major concern if you’re in the UK or a wealthy continental European nation,” he argues.

“However, if you’re in a small emerging market where inflationary prices have occurred – which is pretty much everywhere outside of Asia – I believe you should be concerned about the consequences, because you’re entering a situation of greater fragility on international capital markets, and you’re on the front lines of that.”

When the US boosts interest rates, investors generally shift money away from riskier economies, causing local currencies to depreciate.

This puts further pressure on governments, particularly those with high dollar-denominated debt, at a time when budgets are already strained because to the Covid issue.

The situation has become even more serious as a result of Russia’s invasion of Ukraine, which has disrupted global energy and food markets.

According to Professor Obstfeld, who is also a fellow at the Peterson Institute for International Economics, it is not the Fed’s role to focus on spillover effects.

“Out-of-control US inflation is the final issue that is unstable or possibly destabilizing for global markets,” he argues.

Companies have blamed the price hikes on rising expenses due to supply shortages, transportation problems, and salary increases as they compete for workers in a tight labor market.

Despite the advances, demand in the United States has remained robust, fueled in part by increased government aid to households during the epidemic.

However, President Joe Biden is still under pressure from rising food and gas prices, as inflation continues to outstrip wage growth.

Sheilla Thompson, a manager for a social services organization in Brooklyn, says she has put off going to the doctor because she is concerned about how the additional expense would fit in with quickly rising grocery and other basic expenditures.

“I’m going to have to cut back,” says the 45-year-old. “All kinds of things have risen.”

“Can’t the government put a stop to all these price hikes?” she asks, adding, “Can’t the government put a stop to it?”