The US Federal Reserve raises the reference interest rate another 75 points

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The US central bank did what it was expected to do on Wednesday, raising its benchmark interest rate by three-quarters of a percentage point as it intensifies its battle to rein in runaway inflation.

The Federal Reserve raised the upper limit of its benchmark rate, known as the fed funds rate, to 2.5 percent.

That matches the Bank of Canada rate, after Canada’s central bank raised by a full percentage point earlier this month.

After slashing interest rates in the early days of the pandemic, central banks around the world recently began aggressively raising interest rates to tackle inflation that has reached its highest point in decades.

The official US inflation rate topped 9 percent last month, while it is currently over 8 percent in Canada.

The US fed funds rate is now at the highest point it reached during the previous business cycle, said Desjardins economist Royce Mendes, adding that the central bank’s decision makes it clear that fighting inflation it is the Fed’s top priority, even as signs mount that it may already have peaked and a recession may be looming.

“This still looks like a central bank that is very focused on fighting inflation even in the face of a weakening in the underlying economy,” Mendes said.

Federal Reserve Chairman Jerome Powell will have more to say about the bank’s line of thinking at a news conference on Wednesday afternoon.