How the Fed could raise interest rates for the first time since 2009
The US Federal Reserve is expected to raise interest rate policy for the fifth time in six months this week as it continues to push inflation down and the US economy to the brink of recession.
The US economy has already shrunk by almost 3% in 2016, the worst performance since 2009.
The central bank has said it expects inflation to reach its 2% target by the end of 2017 and the unemployment rate to drop below 6%.
The Federal Open Market Committee will meet on Wednesday to discuss its next policy action, but if it moves ahead with the hike, it would be the first such rate increase since 2009 when it cut rates by a quarter of a percentage point.
It would come as the Fed was considering an interest rate increase for the fourth time in the past five years.
President Donald Trump has made the decision to cut rates once or twice a year.
Since the end, the US has seen a string of rate cuts from the Fed.
In October, it cut its benchmark overnight rate to a record low of 1.625%.
In February, it slashed its benchmark rate to 0.625%, a level it hasn’t been at since February 2019.
A pair of rates cut earlier this month were announced by Fed officials, and it was the third time the central bank was to cut its rate.
On Tuesday, the Fed also cut its key lending rate, which allows banks to borrow cash from the central banks reserves.
If it cuts rates again this week, it will mark the first rate cut since December 2015 when it slashed the benchmark overnight rates by 0.75 percentage points.
Fed chair Janet Yellen has said the Fed is likely to raise rates for a fifth time since it was first appointed in 1913.
As it has done in the previous four rate hikes, the committee will decide how much to hold in reserves.
If it does not do so, it could increase rates again as early as next week.
Some experts predict rates could rise another quarter to a full one percent by the time the Fed’s next meeting is held next month.
A rise in interest rates is not unusual for a country that has been in recession for years.
While the Fed has cut rates in the wake of the Great Recession, the economy has bounced back in recent years.
It grew at an annual rate of 3.3% in 2017, its fastest rate in seven years.