But analysts predict a half-point jump in the Fed’s lending benchmark will remain steep, amid efforts by the US central bank to cool demand to reduce consumer spending. Households in the world’s largest economy have been hit by soaring prices, made worse by rising energy costs following Russia’s February invasion of Ukraine.
To make borrowing more expensive, the Federal Reserve has raised interest rates six times this year, including four extraordinary 0.75-point hikes, so that they now stand in a range of 3.75-4.00%. “We think the stage for this month’s increase will increase (half a point),” said Oren Klachkin, an analyst at the Oxford Economics, noting that interest rates are a sensitive sector as housing and inflation signals show relaxation. The plan will be announced after the two-day meeting of the Federal Reserve’s Monetary Policy Committee (FOMC), which begins on March 13.
The ex-colonists were cautious about increasing their wages, fearing that higher wages would add to inflationary pressures. “H’s main concern is really wear growth,” said Martin Wurm, an analyst at Moody’s Analytics. “That doesn’t necessarily mean that (the second rank) will keep climbing forever, but it means that it will go up a bit and … it will remain high next year,” Wurm told AFP.
With a higher level of proof, it becomes more expensive to borrow money for larger purchases, such as cars and property, or to expand a business.
– ‘Signs of stress’ –
Despite the H crackdown, US consumer spending was up 7.7% year-on-year in October, while job creation remained strong, leaving markets nervous about the possibility of the central bank extending its aggressive monetary policy.
“A strong labor market, rising wages and robust household balance sheets… are key areas of support” for demand, said ING economist James Knightley. Household wealth has risen by $30 trillion since the start of the pandemic in 2020, he noted, allowing consumers to dip into savings as the cost of living rises.
“But we have also seen an increase in the use of consumer loans and credit cards for financial spending, which could indicate some signs that stress and the family’s efforts to maintain a standard of living are beginning to fade,” he said. Knightley told AFP. .
– minor withdrawal –
Fed President Jerome Powell suggested possible relief hikes in December, although he warned that “it could take some time.” The fear of this relief is less significant than the questions about how much more rates should be written and how long they should be kept tight, he added in a speech in November.
While many economists believe the chance of a recession is 50-50, this probably means a small contraction in GDP, according to Wurm. “What we don’t necessarily expect is a big financial crisis like the one in 2008,” he opined, adding that “large parts of the economy are still in very good shape.”
The US economy has rebounded strongly after Covid-19, while the lockdown period has also brought gains to US companies, showing resilience despite the sharp tightening of H. Knight, ING Analyst, said policymakers should maintain a mindset of doing little risk. not too much danger.
“They’re going to make a recession as they’ve done inflation,” he added.