The US Federal Reserve (Fed) yesterday raised its key interest rate which affects many consumer and business loans by three-quarters of a point for a third straight time to a range of 3-3.25 per cent to beat inflation. Economic growth will be weak for the next few years and unemployment will rise, project Fed officials, who indicated higher rate hikes in future. Higher rate hikes in future are expected to raise the risk of a recession. This is the highest hike since early 2008.
The Fed is expecting the jobless rate to reach 4.4 per cent by the end of next year, up from its current level of 3.7 per cent. Talking to Textalks, the textile manufacturers and exporters feared further rise in dollar-rupee parity ahead, urging the government to ensure a competitive edge to the textile industry in a highly volatile global trade situation. Already, they said the Europe is passing through a depression while Pakistan itself is witnessing unprecedented price hike due to a commodity cycle world over.
The benchmark rate would be raised to nearly 4.4 per cent by the year end, a percentage point higher than was projected in June and further next year to about 4.6 percent the highest level since 2007.
The decision followed a recent government report that said inflation was spreading more broadly through the economy, with hikes in rents and other services worsening despite easing of some earlier drivers of inflation like gas prices.
