America’s central bank ‘Federal Reserve’ has increased interest rates for the first time in 3 years. The central bank has taken this step to reduce the rising inflation in the country. Now the interest rate in America has increased to between 3.75% to 4.00%. All 12 members of the Federal Committee unanimously took this decision to increase interest rates by 0.25%. On this decision of the Federal Reserve, US President Donald Trump said that “Interest rates in America should be 1% or less. We are ‘taking over’ almost every country in the world, and this cannot go on any longer. Lower interest rates for America, and do it fast!” Question 1. Why did the US Federal Reserve decide to increase interest rates? Answer: The objective of the US Federal Reserve is to maintain the inflation rate at the target of 2%. Last month, the inflation rate in America reached 3.4%. The Fed had to raise interest rates to control inflation and bring it back to its 2% target. Question 2. What are the main reasons for the sudden increase in inflation in America? Answer: There are three main reasons behind the increase in inflation in America: Question 3. What does US Fed Chairman Kevin Worsh have to say on this decision? Answer: Fed Chairman Kevin Wersh told reporters, “The plain and simple thing is that inflation remains very high and it has been at high levels for a very long time.” He said Wednesday’s increase will help in achieving the committee’s 2% inflation target on time. Question 4. What direct impact will this interest rate increase have on American citizens? Answer: This decision will have a direct impact on American consumers: Question 5. What will be the impact of increasing interest rates on American business? Answer: When the Fed increases interest rates, consumer demand in the markets decreases. People postpone purchases and investments. This could affect the sales of American businesses. Question 6. What impact can this decision have on the US midterm elections? Answer: This decision has come at a very wrong time for President Trump and his Republican Party. Midterm elections are to be held in America in November. That means, less than 50 days are left. These elections will decide whether the American Congress (Parliament) will be controlled by Republicans or Democrats. Voters troubled by inflation and expensive loans can vent their anger in the elections. Question 7. What has been the dispute between President Donald Trump and the Fed Chairman? Answer: Trump has always been a supporter of low interest rates. He had an ongoing dispute with former Fed Chairman Jerome Powell regarding this. When Powell’s term ended in May, Trump appointed his favorite Kevin Worsh as Fed chairman, in the hope that he would reduce rates. During a visit to Ireland, Trump said that “America should have the lowest interest rates in the world.” However, after becoming chairman, Warsh increased the rates. When reporters asked Warsh about Trump, he said, “I have nothing to say about my conversation with the president.” Question 8. What did Donald Trump say after the interest rate increase? Answer: About three hours after the decision, Donald Trump said: America is the most trustworthy country in the world and the most capable of repaying its debt. Since America is handling and helping the entire world economy, the Federal Reserve should immediately reduce the interest rates for the people of the country to 1% or even less, so that everyone can get very easy and cheap loans. Question 9. What is the Fed’s estimate or outlook regarding future interest rates? Answer: Fed members have indicated that another increase in rates by 0.25% could be made by the end of 2026. Moreover, the Fed estimates that these increased interest rates could remain at this level till the year 2027, so that inflation can be completely controlled. Knowledge Box: What is ‘Federal Reserve’ and its impact on India?
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America increased interest rates for the first time in 3 years: increased by 0.25% to 4%, Trump said – reduce the rates immediately; Understand its impact in 10 questions
