US raises interest rates for 1st time in 3 years:Rates rise by 0.25% to reach 4%; Trump says, “Cut rates immediately”

US central bank, the Federal Reserve, has raised interest rates for the first time in three years. The central bank has taken this step to bring down rising inflation in the country. Interest rates in the US have now risen to between 3.75% and 4.00%. All 12 members of the Federal Committee unanimously decided to raise interest rates by 0.25%. Commenting on the Federal Reserve’s decision, US President Donald Trump said, “Interest rates in America should be 1% or lower. We are ‘taking care of’ almost every country in the world, and this cannot continue any longer. Lower interest rates for America, and do it quickly!” Question 1. Why did the US Federal Reserve decide to raise interest rates? Answer: The main objective of the US Federal Reserve is to create maximum employment opportunities in the country and keep the inflation rate at its target of 2%. Inflation in the US reached 3.4% last month. The Fed had to raise interest rates to control inflation and bring it back to the 2% target. Question 2. What are the main reasons for the sudden rise in inflation in the US? Answer: There are three main reasons behind the rise in inflation in the US: Question 3. What does US Federal Reserve Chairman Kevin Warsh have to say about this decision? Answer: Fed Chairman Kevin Warsh told reporters, “The clear and straightforward point is that inflation remains far too high and has been at elevated levels for quite some time.” He said Wednesday’s increase would help the committee achieve its 2% inflation target on time. Question 4. What direct impact will this interest rate hike have on ordinary Americans? Answer: The decision will have a direct impact on American consumers: Question 5. What impact will higher interest rates have on American businesses? Answer: When the Fed raises interest rates, consumer demand in the markets declines. People postpone purchases and investments. This could affect the sales of US businesses. Question 6. What impact could this decision have on the US midterm elections? Answer: This decision has come at an extremely wrong time for President Trump and his Republican Party. The US midterm elections are due to be held in November. That means fewer than 50 days remain. The elections will determine whether the Republicans or the Democrats retain control of the US Congress. Voters troubled by inflation and expensive loans could vent their frustration at the polls. Question 7. What dispute has there been between President Donald Trump and the Fed chairman? Answer: Trump has always supported lower interest rates. This led to an ongoing dispute with former Fed Chair Jerome Powell. When Powell’s term ended in May, Trump appointed his preferred candidate, Kevin Warsh, as Fed chair, in the hope that he would cut interest rates. During his visit to Ireland, Trump had said, “The United States should have the lowest interest rates in the world.” However, after becoming chair, Kevin Warsh raised interest rates. When journalists asked Warsh about Trump, he said, “I have nothing to say about my conversations with the President.” Question 8. What did Donald Trump say after the interest rate hike? Answer: About three hours after the decision, Donald Trump said: The US is the world’s most reliable country and the most capable of repaying its debt, and no one can question its creditworthiness. Since the US is supporting and assisting the global economy, the Federal Reserve should immediately cut interest rates to 1% or even lower for the country’s people and businesses, so that everyone can obtain loans easily and at low cost. Question 9. What is the Fed’s expectation or outlook for interest rates in the future? Answer: Fed members have indicated that there could be one more 0.25% rate increase by the end of 2026. In addition, the Fed expects these higher interest rates to remain stable at the same level until 2027, so that inflation can be brought fully under control. Knowledge Box: What is the ‘Federal Reserve’ and how does it affect India?