Thursday, February 2, 2023

The Federal Reserve will continue to raise interest rates to “return to 2% inflation”.

WASHINGTON DC – The US Federal Reserve (Fed) will continue to raise interest rates this year and the fact that it only raised half a point at its last meeting – after 4 consecutive increases of 0.75 – does not indicate that it will stop doing so. So.

This was stated by several members of the Federal Open Market Committee (FOMC) at its last meeting held in December, as announced in the minutes of the meeting published by the Fed this Wednesday.

“Several participants emphasized that it will be important to clearly communicate that a slowdown in the pace of rate increases is not a sign of a weakening of the Committee’s resolve to achieve its price stability objective or a decision that inflation is already at risk.” was present.” Way down”, the text says.

It said the “unwarranted discounting” of financial conditions “driven by a public misconception of the Committee’s response role” would complicate the Committee’s effort to restore price stability.

On December 14, the Fed announced a half-point increase in the official interest rate, its seventh since March, which remained in a range between 4.25 and 4.5%, its highest in 15 years since December of 2007. is the level. This half-point increase came after 4 consecutive 0.75s.

In the press conference following this announcement, Fed Chairman Jerome Powell predicted further interest rate hikes in the future unless “monetary policy is tight enough to return to 2% inflation”.

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According to the Fed’s projections, the rate hike will bring down inflation. Thus, the agency calculated, inflation will top out at 5.6% this year and prices will gradually decline until they reach 2.1% in 2025, one-tenth of their target.

The regulator has forecast that the world’s leading economy will kick off 2022 with a growth of 0.5% and grow by the same extent in 2023. It forecasts an improvement of three tenths of this year’s forecast but a worsening of 7 tenths of the previous forecast.

Powell stressed that these projections do not point to a recession because growth is positive, albeit modest.

Nation World News Desk
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