US makes major interest rate rise to tame soaring prices

The US central bank has announced another unusually large interest rate hike as it battles to rein in soaring prices in the world's largest economy.

The Federal Reserve said it would increase its key rate by 0.75 percentage points, targeting a range of 2.25% to 2.5%.

The bank has been raising borrowing costs since March to try to cool the economy and ease price inflation.

But fears are rising the moves will tip the US into recession.

A string of reports have shown falling consumer confidence, a slowing housing market, jobless claims rising, and the first contraction in business activity since 2020.

A stronger dollar, driven by the higher interest rates, is also hitting economies overseas and eroding the profits of US-based international firms.

As US growth stalls and price rises squeeze households around the world, the IMF warned this week that the global economy may be teetering on the brink of recession.

But with inflation soaring, central banks "don't really have a choice" about whether to act, said economist Pierre-Olivier Gourinchas, director of research at the International Monetary Fund.

In a statement announcing its decision the Fed said it expected "ongoing increases" in rates would be "appropriate" in the months ahead.

Earlier this month, the European Central Bank announced an unexpectedly large rate rise - its first in 11 years. The Bank of England has been raising rates since December, and dozens of other countries have taken similar steps.

"Most central banks are tightening monetary policy," Mr Gourinchas said. "The big question looking ahead is how quickly can this monetary tightening bring back inflation to reasonable levels."