In a statement on Wednesday, the leadership of the US central bank - the Federal Reserve - noted that Russia's invasion of Ukraine exacerbates inflationary pressures through higher oil and food prices..

The Federal Reserve stepped up its fight against the highest inflation in 40 years by raising its benchmark interest rate by half a percentage point on Wednesday. This is the most radical move since 2000..

The Fed's key short-term rate hike pushed it to a range of 0.75% to 1%, the highest since the pandemic hit two years ago..

The Fed also announced that it would begin cutting its huge balance sheet, made up mostly of Treasury and mortgage bonds, by $9 trillion.. The reduction of these reserves will lead to a further increase in the cost of loans throughout the economy.

With soaring food, energy and consumer goods prices, the Fed's goal is to cut spending and slow economic growth by making it more expensive to borrow for individuals and businesses. The central bank hopes that the higher cost of mortgages, credit cards and car loans will slow spending enough to curb inflation, but not enough to cause a recession..

Such a policy of financial balancing is an extremely delicate matter.. The Fed has come under fire for being too sluggish in starting to tighten credit, and many economists are skeptical that it will help avoid a recession..

Speaking at a press conference on Wednesday, Fed Chairman Jerome Powell made it clear that more big rate hikes are coming.. He said an additional half-point increase in the Fed's key rate "

At his press conference, Powell emphasized that he believes "

In a statement on Wednesday, central bank officials said Russia's incursion into Ukraine is exacerbating inflationary pressures by raising oil and food prices.. It also noted that "

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Inflation in the US, according to the Fed, reached 6.6% in April. This is the highest figure in four decades.. Inflation has accelerated due to a combination of high consumer spending, chronic supply disruptions and soaring gas and food prices exacerbated by Russia's war against Ukraine.

Some economists warn that the Fed is failing to address some of the problems fueling inflation, such as shortages of goods and labor..

" “The Fed’s tightening (policy) does not lead to the opening of Chinese factories, an increase in grain supplies from Ukraine, moving container ships to where they are needed, or hiring truckers to transport goods.”.

Fed tightening is already having some impact on the economy. Home sales fell 2.7% from February to March, reflecting a rise in mortgage rates partly due to the Fed's planned rate hike.. The average rate on a 30-year mortgage has jumped by 2 percentage points since the beginning of the year, reaching 5.1%.

However, by most indicators, the overall economy remains healthy.. This is especially true for the US labor market: hiring is plentiful, layoffs are low, unemployment is close to a 50-year low, and job openings are at an all-time high..

At least 400,000 jobs have been created so far in 11 straight months and employers are battling labor shortages. Wages are growing by about 5% per year. This stabilizes consumer demand despite price spikes.