Responding to the United States (US) Federal Reserve’s decision to raise its rate by 75 basis points, US top banks, JP Morgan Chase, Wells Fargo and Citigroup have also raised their prime lending rate by 75 basis points to 4.75 per cent effective today (June 16).
US Bancorp (with US$588 billion in assets, is the parent company of US Banks National Association) has also increased its prime lending rate to 4.75 per cent from four per cent effective June 16, 2022.
Earlier this week, the Federal Reserve increased its base rate by 0.75 percentage points to the range of 1.5 per cent to 1.75 per cent in an effort to curb inflation in the US which has risen to 8.6 per cent.
It is expected to increase the rate further during the remainder of the year.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures.”
Open Market Committee of the Federal Reserve
Its Open Market Committee said: “Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months and the unemployment rate has remained low.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures.”
An investment banker from the firm Quilter Cheviot is of the view that the Fed moved too slowly, got caught flat footed and is now making up for lost time.
Inflation, the world over, was expected to be transitory with economies expected to come roaring back by the end of Q1, 2022.
In Jamaica, Governor of the Bank of Jamaica Richard Byles moved quickly to minimise the harsher impact of galloping inflation on most Jamaicans where an income per capita of US$6,000 prevails.
He was castigated and pilloried by some members of the business community and commentators for his efforts. With both the Bank of England and the US Federal Reserve raising their base rate fairly aggressively, it will be interesting to ascertain their thought now on this prescription.
JP Morgan’s Bob Michele believes there may very well be at least two more 75 basis point increases this year.
“Hell hath no fury as a Federal Reserve scorned,” he told Bloomberg.
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