The US Federal Reserve, the country’s central bank, boosted its benchmark overnight interest rate by 75 basis points today as it seeks to control runaway inflation in the world’s largest economy.

The three-quarters of a percentage point rise is the Fed’s second such hike in six weeks.

The latest federal funds rate increase seeks to arrest a US inflation rate that has been pegged at greater than nine per cent for the 12 months ending in June.

The rate-setting Federal Open Market Committee, which was unanimously in favour of the hike, explained their rationale in a statement issued by the Federal Reserve.

“Recent indicators of spending and production have softened. Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.

“Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.

“The Committee seeks to achieve maximum employment and inflation at the rate of two per cent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 per cent 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 were issued in May. The Committee is strongly committed to returning inflation to its two per cent objective.

“In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.

“The Committee's assessments will take into account a wide range of information, including readings on public health, labour market conditions, inflation pressures and inflation expectations, and financial and international developments.”

At the consumer level, the rise in the federal funds rate will affect car loan, credit card and mortgage interest rates in the United States.

Many eyes in Bermuda will inevitably now turn towards the island’s banks to see if they pass on none, some, or all, of the Fed rate increase to their customer base.