Ukraine war: US sees upward pressure on inflation

Washington: The US Federal Reserve has raised its benchmark interest rate by a half percentage point, marking the sharpest rate hike since 2000, as it takes more aggressive steps to rein in the highest inflation in four decades.

The Federal Open Market Committee (FOMC), the Fed's policy-making body, decided to raise the target range for the federal funds rate to 0.75 to 1 per cent, the Fed said in a statement issued on Wednesday after a two-day policy meeting.

According to the statement, the committee also decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1, reports Xinhua news agency.

"Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong," the Fed said. "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 Fed noted, adding that the Russia-Ukraine war and related events are creating "additional upward pressure" on inflation and are likely to weigh on economic activity.