Increase in lending rates by 50 base units decided at its two-day meeting the Fedmarking the beginning of a series of more aggressive moves to shield the US economy, which is being pounded by the strongest inflationary pressures of recent decades.
This is the first increase by 50 bp. for 22 yearswhile the bank’s move puts an end to the era of the most relaxed monetary policy adopted to support the economy since the coronavirus.
In addition to the long-awaited decision to raise interest rates, the US Federal Reserve also gave the green light to launch a program to reduce its balance sheet – of about 9 trillion. dollars – $ 95 billion a month, starting in June.
It is recalled that at the March meeting, the Fed “Declared a battle” against inflation increasing the reference rate – for the first time since 2018 – by 25 basis points. However, in the last month, the pressures on the American economy are intensifying, although the labor market is recovering rapidly.
According to the latest data from the relevant ministry, inflation climbed to 8.5% in March, reaching its highest level since December 1981. In the immediately preceding month, it reached 7.9%. The rapid acceleration was attributed on the one hand to the jump in the energy price index (by 32% on an annual basis), and on the other hand to the food price index (by 8.8% on an annual basis).
It is worth noting that the Fed has discounted a total of six interest rate hikes this year.
Moneyreview
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