Home Business against inflation, the Fed counterattacks with another rate hike

against inflation, the Fed counterattacks with another rate hike

42
0

Determined to fight against still high inflation, the American central bank (Fed) announced on Wednesday September 21 a new sharp increase in its rates, by three quarters of a percentage point, and warned that it now anticipates almost zero growth. in 2022.

The Fed’s main policy rate now stands in a range of 3.00 to 3.25%, the powerful institution announced in a press release.

This is the third time in a row that the Fed has made a hike of this magnitude, after a more usual first hike of a quarter point in March, and a hike of half a point in May. And it anticipates that additional increases will be necessary in 2022, it is indicated in the press release, until raising the key rate by another percentage point.

Relieve pressure on prices

Raising the key rate increases the interest rates of various loans to individuals and professionals, in order to slow down economic activity, and therefore to ease the pressure on prices.

Read:  Moderna boss to sell stock options for charity

Mortgage rates, for example, have risen since the beginning of the year, and have just exceeded 6% for a 30-year loan, for the first time since 2008. This is driving down sales in this sector, which had displayed insolent good health since the start of the pandemic.

The Federal Reserve took the opportunity to update its economic forecasts, and now anticipates almost zero GDP growth in 2022, when it was counting, in June, on + 1.7%. She sees it then rebound to 1.2% in 2023, less strong, however, than the 1.7% growth she expected in June for next year.

Inflation forecasts close to what was expected

Inflation forecasts, on the other hand, remain close to what was expected in June: 5.4% in 2022 (vs. 5.2%) for PCE inflation, before slowing sharply in 2023, to 2.8% (compared to 2.6% previously).

Read:  The CES, a show that has become a must in Tech

The Fed favors this inflation index, which stood at 6.3% over one year in July, according to the most recent figure available, to the CPI index, which refers to the indexation of pensions in particular. Admittedly, this slowed down in August in the United States, thanks to the drop in gasoline prices, but, at 8.3% over one year in August, showed still very strong pressure on prices, with generalized inflation.

The US central bank, like its counterparts around the world, is trying to rein in inflation caused by supply chain disruptions linked to Covid-19, and exacerbated by rising energy and food prices with the war in Ukraine. In early September, the European Central Bank (ECB) raised its rates by three-quarters of a percentage point, unprecedented.

Previous articleUnited Kingdom: the British divided over the exorbitant cost of the funeral of Elizabeth II
Next articleSafari 16 on Mac breaks push notifications