The Federal Reserve announced on Wednesday the most aggressive rate hikes in nearly 30 years, saying it is ready to do so again next month in a full-scale fight to curb rising inflation.
Federal Reserve Chair Jerome Powell explained a 0.75 percent point hike, lowering inflation is “essential” and policymakers “to restore price stability on behalf of the U.S. family.” It has both the necessary tools and solutions. “
He emphasized that the goal is to achieve it without damaging the US economy, but acknowledged that there is always a risk of overshoot.
Federal Reserve Board Policy Decisions The Federal Open Market Committee has raised benchmark borrowing rates from zero at the beginning of the year to 1.5 to 1.75 percent.
The blockbuster move was the first 75 basis point increase since November 1994.
Powell told reporters that the move was “abnormally large,” but he didn’t expect “a move of this size to be common.”
But, “from today’s point of view, an increase of either 50 basis points or 75 basis points seems most likely at the next meeting,” he said.
“Reducing inflation is essential to sustaining a strong labor market situation that benefits everyone.”
U.S. President Joe Biden backed the federal government’s efforts, with soaring prices for gasoline, food, automobiles and many other commodities undermining his efforts to maintain the economy towards a major midterm election in November. I look forward to success in order to make it a reality.
-‘Please support yourself’-
President Esther George of the Federal Reserve Bank of Kansas City, a prominent inflation hawk, opposed the Commission’s vote and wanted a slight halving.
Until recently, central banks seemed to approve a 0.5 percent increase, but economists say the sharp rise in inflation put the Fed behind the curve. In short, we needed to react strongly to prove our determination to fight rising prices.
According to the median quarterly forecast, committee members now see the federal funds rate rising from 1.9% in March to 3.4%.
They also expect the Fed’s preferred inflation index to rise to 5.2% by the end of the year, reducing GDP growth in 2022 from the previous 2.8% forecast to 1.7%.
However, “we are not currently trying to cause a recession,” Powell said, stressing that the goal is to return to 2% inflation, including rising unemployment.
“It’s not clear if the economy is as resilient as the Fed expects,” said Diane Swonk, a longtime Fed watcher at Grant Thornton.
She called the central bank’s outlook “fantastic” and compared the current situation to the early 1980s, when then-Fed President Paul Volcker curbed inflation and plunged the economy into recession. ..
“Be prepared for the next. This is a Volcker-style Fed, which means it is willing to accept rising unemployment and recessions to avoid repeating the mistakes of the 1970s. “She said on Twitter. “I grew up in Detroit and I remember that time well. It was deeply scarred and ugly.”
–Suddenly–
The US central bank is in a part of the world where Covid-19 remains a challenge and is still a challenge, with strong demand from US consumers for homes, automobiles and other commodities in the transportation and supply chains. In March, we started raising interest rates from zero because of a collision with the roar of the bank.
It fueled inflation, which deteriorated dramatically after Russia invaded Ukraine in late February, Western nations imposed strict sanctions on Moscow, and food and fuel prices rose sharply.
The FOMC statement said the effects of Russia’s invasion of Ukraine “created further upward pressure on inflation and weighed heavily on global economic activity.”
And the ongoing blockade of Covid-19 in China “is likely to exacerbate supply chain disruptions.”
For the first time, US gasoline prices exceed $ 5.00 per gallon, setting new records every day.
Economists thought March was the peak of consumer price inflation, but it surged again in May, rising 8.6% in the last 12 months, and wholesale prices almost entirely due to soaring energy, especially gasoline. It soared.
The Fed was distracted by the speed of price increases, and policymakers usually prefer to articulate a policy shift to financial markets, but the latest data has changed the calculation.
