The Federal Reserve's Interest Rate Increases and Their Effect on the U.S. and Global Economies under the Covid-19 Pandemic

Linnuo Yi

doi:10.54254/2754-1169/59/20231131

Research Article

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Published on 5 January 2024

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Yi,L. (2024). The Federal Reserve's Interest Rate Increases and Their Effect on the U.S. and Global Economies under the Covid-19 Pandemic. Advances in Economics, Management and Political Sciences,59,265-278.

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The Federal Reserve's Interest Rate Increases and Their Effect on the U.S. and Global Economies under the Covid-19 Pandemic

Linnuo Yi *^,1,

¹ Bentley University, Waltham, MA02452, United States

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/59/20231131

Abstract

This paper delves into the successive Fed rate hikes that began in March 2022 and their far-reaching impact on the domestic and global economy. The paper primarily examines the reasons behind these rate hikes, focusing on their response to the problems caused by the COVID-19 pandemic, particularly unemployment and inflation trends. The pandemic triggered widespread lockdowns, leading to severe supply chain disruptions and economic downturns. During this period, unemployment rates rose sharply and reached historic levels. Central banks worldwide had adopted loose monetary policies to stabilize economies in the short term. However, this also raised the risk of persistent inflation. Fiscal stimulus, intermittent interest rate cuts, and a raft of bailouts, such as the CARES Act, have added complexity to the economic landscape, affecting various sectors and necessitating higher interest rates to restore pre-pandemic stability. Disruptions in global supply chains played a key role in stoking inflationary pressures, eroding consumer purchasing powers, and highlighting the urgency for the US Federal Reserve to intervene by adjusting interest rates. Assessing the impact of these rate hikes on stocks shows a resilient market that remained optimistic about the U.S. economic recovery. In addition, the study outlines the impact of these rate hikes on foreign exchange markets, international capital flows, emerging markets, trade dynamics, and global competitiveness.

Keywords

Covid-19, Federal Reserve, economic, interest rate

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About volume

Volume title: Proceedings of the 2nd International Conference on Financial Technology and Business Analysis

Conference website: https://www.icftba.org/

ISBN：978-1-83558-209-1(Print) / 978-1-83558-210-7(Online)

Conference date: 8 November 2023

Editor：Javier Cifuentes-Faura

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.59

ISSN：2754-1169(Print) / 2754-1177(Online)

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