US borrowing costs hit 19-year high as Fed holds interest rates
Summary
US government borrowing costs rose to their highest level in 19 years after the Federal Reserve decided to keep interest rates the same. The Fed’s choice raised concern about whether it is acting fast enough to control inflation, which has been affected by recent conflict involving President Trump.Key Facts
- The yield on the 30-year US Treasury bond increased to about 5.24%, the highest since 2007.
- The Federal Reserve kept its main interest rate between 3.5% and 3.75% for the fifth time in a row.
- Fed Chair Kevin Warsh affirmed the Fed’s commitment to keeping inflation at a 2% target.
- Inflation in the US slowed to 3.5% annually in June but risks rose again after fighting resumed between the US and Iran.
- Higher bond yields have already increased borrowing costs for the overall economy.
- Markets reduced their expectation of a rate increase in September after the Fed’s decision.
- US stock markets dropped following the Fed meeting, with major indexes falling between 1.5% and 2.2%.
- Some experts feel the Fed’s reasons for not raising rates now were not clearly explained.
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