The Federal Reserve (FED) of the United States raised the interest rate that regulates the cost of money by 75 basis points this Wednesday, thus placing it in a range between 3.00% and 3.25%, with the aim of controlling inflation.
On the other hand, the Fed revised downwards the growth forecast for the US economy and placed it just above zero percent in 2022 (+0.2%)compared to the 1.7% expected last June, the AFP news agency specified.
The decision of the Federal Open Market Committee (FOMC) seeks to try to neutralize the increase in prices, which could lead to a vertiginous drop in consumption and an increase in unemployment.
The monetary organization anticipated that “additional hikes will be necessary”before an expected inflation now of 5.4% for this year, compared to the 5.2% previously forecast.
The scourge of inflation
Despite the fact that US inflation began to decline from 9.1% registered in June -which was a 40-year record-, the index remained high in the following months and, in fact, the core index (which excludes food and energy ) accelerated again in August.
Faced with an inflation that does not give respite, the president of the FED Jerome Powell had anticipated another “unusually large” increase of 75 points on Tuesday. -which took place this Wednesday and which will take the rate to unprecedented levels since the financial crisis of 2008- to avoid a loosening of inflationary expectations, and confirmed that the entity will continue with a restrictive monetary policy “for some time”, with the objective of stabilizing prices again at the entity’s traditional goal of 2% per year.
Since then, various FED governors have publicly expressed themselves in favor of a rise in said range and the market has even speculated on a rise of 100 points, which is considered unlikely.
Michael Feroli, chief US economist at JPMorgan, told the Bloomberg news agency that a 100-point hike – which would be the largest single rise since the 1980s – would generate “expectations of lower rates for next year.” next,” which would backfire on the Fed by lowering long-term bond yields.
Among the reasons of those who support a rise of 100 points is the fact that consumption -and therefore, the pressure on demand- continues to remain solid.
“There may be reasons for a (100-point) hike but (policymakers) have to be careful not to overreact to every piece of information,” former Fed official Donald Kohn said.
So far this year, the entity has ordered a rise in reference interest rates of 25 percentage points in March, 50 in May, 75 in June and another 75 in July, taking it from levels close to zero to a range between 2.25% and 2.50%.
The rise in rates is already reflected in the interest of Treasury bonds: two-year yields are close to surpassing the 4% barrier for the first time since 2007 and have already increased more than 3 percentage points so far this year pointing to the largest annual increase since 1994.
“We are seeing clear signs that central banks are prepared to tolerate recession, if that is the price they have to pay to bring inflation under control,” said Andrew Ticehurst, strategist at Nomura banking.
The International Monetary Fund (IMF) noted in a report on Monday that central banks in emerging and developed economies have accelerated their “rate of tightening” to respond to inflationary pressures.
In that sense, The United States is not the only country to make rate hikes to calm prices: the Swedish central bank raised its rates by 100 points while this Thursday the Bank of England is expected to apply its biggest rise in 33 years with an increase of 75 points.
