The Federal Reserve (Fed, central bank) of the United States raised its reference interest rates on Wednesday by a quarter of a percentage point to take them to 0.25-0.50%facing one inflation at its highest level in 40 years and that it could continue to increase, according to their forecasts. The decision was widely expected by the market and was the first rate hike since 2018.
In this way, the entity that presides over Jerome Powell begins a cycle of tightening its monetary policy to try to put a brake on inflation, after this reached its highest level in 40 years.
The situation in Ukraine “could create additional upward pressure on inflation and weigh on economic activity,” the Fed said in a statement, following a two-day meeting of its monetary policy committee. Even so, the entity considered that “continuous increases” in rates “will be appropriate” to curb inflation, after February prices rose 7.9% year-on-year, thus marking the highest record since 1982.
On the other hand, those responsible for the organization foresee additional rate hikes this yearand predict US GDP expansion of 2.8% in 2022 vs. 4% from its previous forecast.
In addition, the US monetary authority forecast a inflation of 4.3% for this year in that country.
As projected by the Fed this Wednesday after its two-day meeting of the Monetary Policy Committee (FOMC), he expects five to six more hikes this year, so that rates reach the 1.75% to 2% range by the end of 2022.
Powell said that the body will seek to control inflation, without affecting economic growth. In addition, he considered that the risk of a recession is low in the US, and that growth remains solid.
After the statement, the Dow Jones erased its gains for the day this Wednesday, even briefly reaching negative territory.. Wall Street’s flagship index gained a modest 0.13% after reaching 1.72% earlier in the day.