The Federal Reserve of the United States announced an increase of 0.75 in the interest rate

The US Federal Reserve (REUTERS)
The US Federal Reserve (REUTERS)

The United States Federal Reserve (Fed) announced this Wednesday a new go up in the interest rate. On this occasion, the sixth so far in 2022, it was increased by 0.75%.

This strategy of increases began to be applied in March of this year, in an attempt to control the inflation -the highest in 40 years- and the price hikeafter the coronavirus pandemic and in the midst of the war between Russia and Ukraine.

The US central bank met the expectations of economists and the official interest rate of the world’s largest economy now stands at a range of between 3.75% and 4 percent, the highest level since 2007. However, after this latest announcement, members of the entity indicated that they remain “very attentive to the risks of inflation”, for which the future hikes will be in more steps little ones and will take into account the extent to which said tightening “affects economic activity and inflation” as well as “the economic and financial evolution”.

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According to experts, for december could be expected to rise 0.50 percent although, after the meeting of the entity that took place this week, Jerome Powell warned that the ceiling that can be reached by interest rates in the country will be higher than expected, in view of current economic data. “The data received since our last meeting suggests that the final level of interest rates will be higher than previously expected”, which calls into question the will to close the year with an interest rate of 4.4 percent that had manifested itself after the September meeting.

The Fed announced the sixth increase in the interest rate so far in 2022, of 0.75% and estimates that future ones will be in smaller steps (REUTERS)
The Fed announced the sixth increase in the interest rate so far in 2022, of 0.75% and estimates that future ones will be in smaller steps (REUTERS)

In this Wednesday’s statement, the entity also announced that they will continue with this policy of fine-tuning the federal funds rate to a level “sufficiently restrictive” that allows “returning the inflation to the two% in the time”. “Continued increases in the target range will be appropriate,” the US central bank said. These announcements, however, were not a novelty since in September, after knowing the rise of three quarter percentage points, the president of the Fed had anticipated that the appropriate thing is to continue making “more increases in interest rates in the future” until that inflation is under control and that “at some point, as the monetary policy stance tightens further, it will be appropriate to reduce the pace of increases.”

It may interest you: The president of the United States Federal Reserve said that there will be more interest rate hikes, slow growth and “pain” for households and companies

Meanwhile, according to the figures reported this Wednesday, it is still far from reaching the “terminal rate”that is, the maximum rate to which it is willing to go, since it has not been possible to lower inflation to the expected levels.

Jerome Powell assured that the appropriate thing is to continue making
Jerome Powell assured that the appropriate thing is to continue making “more interest rate increases in the future” until inflation is controlled (REUTERS)

The provisions for 2023 provide a rate of 4.6% and a later lowering of the same in the 2025which will allow you to place yourself in the 2.9% by the end of the year. However, these estimates are not representative of a road map since the central bank will depend on the evolution of the economy.

According to the latest data published two weeks ago by the Bureau of Labor Statistics (BLS, for its acronym in English), the year-on-year inflation rate fell for the third consecutive time in the ninth month of the year and stood at 8.2 percentalthough consumer prices rose four tenths monthly.

Following the announcement, Powell will hold a press conference this afternoon to provide more details on the bank’s plans and outlook. This rise occurs less than a week before the midterm elections next Tuesday, November 8, and after the entity’s monetary policy meeting.

(With information from EFE and Reuters)

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