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Full story: Federal Reserve announces biggest interest rate hike since 2000

Dominic Rushe

The Federal Reserve has moved to tamp down soaring inflation in the US, announcing the sharpest rise in interest rates in over 20 years, our US business editor Dominic Rushe reports.

The Fed’s benchmark interest rate was raised by 0.5 percentage points to a target rate range of between 0.75% and 1%. The hike is the largest since 2000 and follows a 0.25 percentage point increase in March, the first increase since December 2018.

More rate rises are expected. The Economist Intelligence Unit expects the Fed to raise rates seven times in 2022, reaching 2.9% in early 2023. Starting in June, officials also plan to shrink their $9tn asset portfolio, a policy move that will further push up borrowing costs.

In a statement the Fed said that although “overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong”.

But it warned that inflation “remains elevated,” the invasion of Ukraine had implications for the US economy that remain “highly uncertain” and Covid-related lockdowns in China “are likely to exacerbate supply chain disruptions”.

Here’s the full story:

Just in. The US Federal Reserve has raised interest rates by 50 basis points, the biggest move in over 20 years.

Fed policymakers voted unanimously to lift its key interest rate, the fed funds rate, to a 0.75%-1% range.

The move, which had been expected by Wall Street, comes after US inflation hit a 40-year high of 8.5%.

Fed says that inflation remains elevated, with the Ukraine war creating upward pressures, and the latest Covid-19 lockdowns in China adding to supply chain problems.

It adds that it anticipates that ongoing increases in interest rates will be appropriate, as it tries to get inflatio under control.

Ahead of the Fed decision later, here’s a round-up of today’s stories.

And some great reading ahead of Bank of England day tomorrow:

Leading anti-corruption campaigner Bill Browder has welcomed the UK’s ban on service sector companies working with Russia, calling it ‘big and welcome news’:

Browder, a prominent critic of Russian president Vladimir Putin, sucessfully lobbied for the Magnitsky Act. It allowed the US to sanction Russian officials responsible for the death of Browder’s tax lawyer Sergei Magnitsky, who died in a Moscow prison in 2009 after uncovering a $230m fraud.

Browder has also called for the US to issue visa bans against British lawyers who worked with Russian oligarchs, using the UK legal system against journalists and whistleblowers.

Iain Wright, managing director, reputation and influence at accountancy body ICAEW, said many firms had already cut ties with Russia:

“The UK government has announced a further package of sanctions aimed at demonstrating to the Russian elite the political and financial costs of their aggression against Ukraine.

“Many of our individual members and member firms have already taken proactive steps to disengage as appropriate with Russia. ICAEW is confident that chartered accountants, whether in practice or in business, will be ready and willing to play the fullest possible role in making these further measures effective.”

Growth across the US services sector has slowed, adding to concerns over the global economy, as firms continue to be hit by surging prices.

The Institute for Supply Management’s non-manufacturing activity index has dropped to 57.1 last month, from 58.3 in March, showing weaker growth than expected.