Federal Reserve set for biggest rate hike in 22 years

By Chinwendu Obienyi

After raising its key short-term interest rate from near zero by a quarter-percentage-point in March, the U.S Federal Reserve again on Wednesday pushed its key interest rate up by another half-point, representing its largest bump in 22 years.

The Fed had begun its current round of policy tightening in mid-March with a quarter-percentage-point rate hike, smaller than many policymakers had wanted given that inflation had hit a 40-year high, but calibrated so as not to inject more uncertainty into global markets which was disturbed by Russia’s Feb. 24 invasion of Ukraine.

In the weeks since that decision, inflation gained new steam as the war pushed up oil and food prices and China’s strict lockdowns to combat the spread of COVID-19 further disrupted supply chains.

Thus, with this development, consumers will have to dig even deeper into their wallets to pay off loans because the move according to the Managing Director, Morgan Capital Securities Limited and an economic analyst, Rotimi Olubi, will drive rates higher on everything from credit cards to mortgages.

 Olubi said, “Interest income of banks will rise as expected and this act by the U.S Fed could lead to downward pressure on commodity prices, drop in global liquidity, increase in the cost of funds from the international debt market. Thus, the cumulative effects of all these increases will pinch borrowers.

Meanwhile, Nigerian equities extended gains from last week as the benchmark index closed 0.98 per cent stronger, crossing the 50,000 point psychological mark, to close yesterday’s trading session at 50,126.41 points, the highest point since 06 August 2008.

On resumption of trading after two-day holiday, buying interest in BUA Cement, Okomu oil, Nigerian Breweries, International Breweries and 27 others kept the market in green territory.

Consequently, the market’s year-to-date (YTD) return rose to 17.35 per cent, while market capitalization gained N262.80 billion to close at N27.023 trillion from an opening value of N26.761 trillion.