The Federal Reserve and the Bank of England increased key interest rates in response to the invasion of Ukraine by Russia
This week, the Federal Reserve raised its benchmark federal-funds rate by a 0.25 percentage point to a range between 0.25% and 0.5%, the first-rate increase since 2018. The Fed’s decision was followed by the Bank of England lifting its key rate to 0.75% from 0.5%. Both the US and the UK central banks referred to Russia’s invasion of Ukraine as one of the reasons for the hike.
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship,” the Fed said. “The implications for the US economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.”
“The invasion of Ukraine by Russia has led to further large increases in energy and other commodity prices including food prices. It is also likely to exacerbate global supply chain disruptions and has increased the uncertainty around the economic outlook significantly. Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the United Kingdom, is likely to slow,” stated the British central bank.