Explainer: What does the US Fed's biggest interest rate hike in 2 decades mean for S'pore and the world?

The Fed's move on Wednesday to raise the official rate by a half percentage point in a bid to quell US inflation, which is sitting at 40-year highs, follows similar recent moves by central banks in India, Australia and New Zealand.pushed the benchmark interest rate above 0.75 per centThe Wall Street Journal reported that additional half percentage point increases in June and July by the Fed could be warranted depending on economic conditions then.

The last time the Fed had raised short-term interest rates by a half percentage point was in May 2000, as the US rebounded from the global financial crisis. It did so then with the same intention of slowing demand to keep inflation in check.Several other central banks have taken similar steps, and others are expected to follow the lead of the US, the world's largest economy.

"It puts pressure on other countries to also increase rates if not all the money will flow out from the emerging markets back into the United States, because everyone saysFor instance, the central bank of India had on Wednesday made an"unprecedented surprise hike" of a half percentage point to preempt the Fed hike.

However, interest rates here will still rise, albeit at a slower pace, as Singapore's rates will still be determined by global interest rates, said Mr Song from CIMB.

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