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The US Federal Reserve has given a clear signal that it will hike interest rates by half a percentage point this week to curb rising inflation and is likely to continue to rise throughout the year.
The Fed has long played a crucial role when the world’s largest economy faces difficult times. Here are some of the key actions taken since the 2008 global financial crisis:
– The financial crisis and the recovery –
November 2008: After the collapse of the investment bank Lehman Brothers, the Fed began injecting liquidity into the financial markets. The central bank launched three such programs before ending asset purchases in June 2014.
December 2008: The central bank cut its key interest rate to zero in the midst of the crisis, where it remained until December 2015.
October 2017: The Fed began reducing inventories on its balance sheet, which had grown to $4.5 trillion from less than $900 billion before the crisis.
– Trade war slows growth –
December 2018 to August 2019: Interest rates peaked in the 2.25 percent to 2.5 percent range.
Fall 2019: The Fed cut rates several times to 1.5 to 1.75 percent as the trade war launched by then-President Donald Trump slowed growth. The Republican leader had criticized the bank for its high interest rates.
– Support during the pandemic –
March 3, 2020: The Fed cuts interest rates by 50 basis points to between 1 and 1.25 percent.
March 16, 2020: As Covid-19 spread across the country and the economy shut down, the Fed cut its lending rate by 100 basis points to zero and resumed its policy of asset purchases, which ended up making $120 billion a month in government bonds and mortgage-backed securities.
– Economy is recovering, inflation is coming –
November 3, 2021: The Fed announced that it would begin slowing the pace of its asset purchases, ending them entirely by the following June, setting the stage for rate hikes to combat inflation.
December 15, 2021: Recognizing that inflation will not be “temporary” as senior officials had believed, the central bank accelerated the end of its asset purchases to March.
March 16, 2022: The central bank hiked interest rates to the 0.25 to 0.50 percent range for the first time since 2018.
April 6, 2022: Minutes of the Fed’s March policy meeting are released, showing many participants saying one or more 50 basis point rate hikes are needed if inflationary pressures persist.
April 29, 2022: The Fed’s favorite indicator of inflation, the Personal Consumption Expenditure Index, rose 6.6 percent year-on-year and 0.9 percent mom in March, both faster than the previous month.
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