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US policy makers hike rates from 1% to 1.75%

The US Federal Reserve took market participants by surprise last week by raising interest rates by 75 basis points, which leaves the Fed funds target rate upper limit at 1.75%. This was the most aggressive single move by the Fed since 1994 and followed an increase in US CPI inflation to a 40-year high of 8.6% y-o-y in May.

After the rate hike, Giles Coghlan, chief analyst at HYCM said: “(This) decision from the Federal Reserve demonstrates that inflation concerns are currently outweighing apprehensions about growth for the central bank. Ever since the headline inflation print came in above market expectations at 8.6%, traders have been pricing in a lot of hawkishness for the Fed, as well as watching for signs that the central bank is getting worried about the economy and planning a slower path of hikes.”

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