Local interest rates for mortgages, consumer loans and corporate loans are going up by 0.25 percentage points after the US Federal Reserve raised the Federal Funds Rate by the same margin on Wednesday, 1 Feb.
Butterfield Bank announced that its US and CI dollar prime lending rates will increase to 7.75% from 3 Feb.
It was the first sign of the Fed slowing the pace of raising rates after seven hikes last year, as the US central bank is attempting to lower inflation.
At the same time, however, the Fed cautioned in a statement more is yet to come and a that “ongoing increases” will be appropriate to rein in economic activity and drive down prices.
Fed chair Jerome Powell said in a press conference that despite some encouraging signs, policymakers “will need substantially more evidence to be confident that inflation is on a sustained downward path”.
Powell insisted that the US central bank would rather do too much and correct this with the appropriate tools when prices fall more quickly than expected than “too little and finding out in six or 12 months that we actually were close but didn’t get the job done”.
Inflation rates in the US and Cayman have come down from record rates last year but remain high.
In the third quarter of last year, consumer price increases dropped to 9.1% from 12.1% in the second quarter.
In the US, inflation declined to 6.5% in December after peaking at 9.1% in June.
The US central bank wants to lower inflation rates to around 2%.
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