Tuesday, May 30, 2023

USA: H announces ninth rate hike after uncertainty over possible credit crisis

H It is also emphasized that “the US banking system is healthy and resilient”; and that it will persist in its object of containing inflation.

The Federal Reserve (Fed) of the United States of America announced this Wednesday a rise in interest rates between 4.75% and 5% points, amid the crisis caused by the collapse of two banks. the country and the help of the third.

This is the ninth hike in a year to fight inflation, although it is less than what H expected when the banking crisis had not yet erupted.

“A healthy and resilient system of trust”

The Fed’s Federal Open Market Committee (FOMC), which made the decision after a two-day meeting, said “the US financial system is healthy and resilient.”

“Recent events tend to result in tighter credit conditions for households and businesses, weighing on economic activity, employment and inflation.” The scope of these is uncertain. “The policy remains highly sensitive to inflation risks,” he said in a note.

He also predicted that “some additional tightening” of his monetary policy could be necessary to achieve his inflation target, although he emphasized that he would continue to monitor the repercussions of this.

It is expected that the chairman of the central bank of the US, Jerome Powell, will appear today before the press about the decision of the Federal Open Market Committee (FOMC, in English) organization will appear after two days. .

growth control

To try to stop inflation, H increases in March 2022 by a timid 0.25. In May it raised rates by 0.5 points and in June it already started a series of increases of 0.75 points, before slowing down to 0.50 last December and further reducing it to 0.25 in February.

Two weeks ago, the question for experts was whether H would raise interest rates this time by 0.25 or 0.5 points, but everything changed with the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank, whose financial situation was worsening due to debt to the monetary policy of the organization , so much so that there had been speculation about the possibility that the central bank would suspend growth.

Finally, H decided to continue with the increases, since inflation in the US is still well above its 2% target and with a robust labor market. In February, inflation in the country stood at 6% year-on-year, the lowest rate since September 2021, after falling four tenths compared to January.

In the current scenario, the main economic leaders of the country, especially the Secretary of the Treasury, Janet Yellen and Powell have tried to reassure the citizens and the markets that the situation will not lead to a financial crisis.

H, in fact, imposed a new system to ensure that banks that protect customer deposits have to make money, and increased the frequency with which it provides foreign exchange operations to ensure that there are enough dollars. in financial matters.

In addition, major US banks joined last week to bail out First Republic Bank with $30bn, which threatened to go the way of SVB Signature after a sharp drop in share prices.

Panic also crossed the pond and almost ended with the Swiss bank Credit Suisse, which was finally acquired over the weekend by its competitor UBS after a crisis of confidence that sank its price in the market.

Before H was announced, Wall Street opened this Wednesday in the red, although almost flat, and the Dow Jones Industrial Average, its main indicator, lost 0.12%, while the European stock market began the session, slightly falling pending the outcome. US central bank certificate.

Nation World News Desk
Nation World News Deskhttps://nationworldnews.com/
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