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In a 2 day meeting held between 14th June 2022 to 15th June 2022, the US federal reserve bank with a unanimous decision by its Board of Governors raised the primary credit lending rate by 75 basis points (bp) to 1.75%, effective from 16th June 2022. The decision was taken with a view to achieving maximum employment and inflation at the rate of 2% over the longer run.
The Primary Credit-lending rate is the basic interest rate the banks are charged to borrow money from the US federal reserve bank.
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Overall economic activity appears to have picked up after edging down in the first quarter. Inflation is in the surge, reflecting imbalances on the supply and demand side related to the pandemic, higher energy prices, and broader price pressures. The invasion of Ukraine by Russia and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. All these situations kept the Federal Open Market Committee (FOMC) alert to the rising inflation.
FOMC said in a statement: “ In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1-1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt, and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that was issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.”
On 16th June 2022, Dollar/Rupee opened at 78.1380 and after making a high of 78.1480 currently, it settled down trading at 78.0430.
-by Gautam
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