Washington - The Federal Reserve on Wednesday raised its benchmark overnight interest rate by half a percentage point, the biggest such jump in 22 years. The U.S. central bank’s chief Jerome Powell requested Americans struggling with high inflation to be patient while officials take the hard measures to bring it under control.

In a widely expected move, the Fed set its target federal funds rate to a range between 0.75% and 1% in a unanimous decision, and Fed Chair Jerome Powell said policymakers were ready to approve half-percentage-point rate hikes at upcoming policy meetings in June and July.

An increase discourages spending just enough to bring down inflation, without tipping the economy into recession, what economists call a "soft landing."

The impact however doesn’t stop with U.S. homebuyers paying more for mortgages or business owners facing costlier bank loans.

“It will put pressure on all types of developing countries,” said Eric LeCompte, executive director of the Jubilee USA Network, a coalition of groups seeking to reduce global poverty.

When the Federal Reserve increases the federal funds rate, it typically increases interest rates throughout the economy, making the dollar stronger. The higher yields attract investment capital from investors abroad seeking higher returns on bonds and interest-rate products.

Investors can pull money out of poor and middle-income countries and invest it in the United States. Those shifts drive up the U.S. dollar and push down currencies in the developing world.

Falling currencies can cause problems. They make it more expensive to pay for imported food and other products.

To defend their sinking currencies, central banks in developing countries are likely to raise their own rates; some have already started. It can cause economic damage, slowing growth, wipe out jobs and squeeze business borrowers.

Despite the risks of collateral damage, the Fed is expected to raise rates several more times this year to combat resurgent inflation in the United States.

It’s another blow to countries still contending with big debts, large numbers of unvaccinated people and surging food prices.

“It’s added pressure,” LeCompte says, “and how much pressure can governments take?’’
-AP