Fed: Another 0.75% increase in interest rates to “fall inflation

In increasing its interest rates by 75 basis points (0.75%)as it had already been discounted by the market proceeded the Federal Reserve (Fed)as it continues to battle inflation that is at its highest level in 40 years.

He signaled, however, that future hikes will be smaller as the central bank assesses the impact of its tightening monetary policy so far on the US economy.

“Continued increases will be appropriate,” the central bank’s announcement reads. While not talking about future decisions, Federal Reserve officials stressed that the pace of future rate hikes will be determined by the overall picture of monetary policy tightening so far, the impact on economic activity and inflation, combined with economic and financial developments.

The above rhetoric reflects the wide-ranging debates taking place lately around the Fed’s aggressively tight monetary policy and its impact on the US and the global economy in general, as well as the risk that continued large interest rate hikes pose to the financial system. triggering a recession at the same time.

While the rapid rate hikes so far have come as part of a broader effort to move quickly to catch up with inflation running at three times the Fed’s 2% target, the central bank is now entering a more nuanced phase – will constantly adjust its monetary policy instead of making “front-loading” increases.

With the new increase of 75 basis points, the Fed’s key interest rate is set in a range of 3.75% to 4%, the highest level since early 2008. The central bank of USA It has raised interest rates at the last six meetings since March, making the fastest rate hikes since the 1970s and 1980s under Paul Volcker, who tried to tame inflation that was at unimaginable heights.

However, the Fed’s statement said policymakers remain “extremely cautious about inflationary risks”, leaving the door open for further rate hikes.

Regarding the economy, the central bank emphasizes that it is growing at a moderate pace, with the labor market remaining strong and unemployment at low levels.

Reuters, moneyreview

Read the News today and get the latest news.
Follow Skai.gr on Google News and be the first to know all the news.