The FED sets the official price of money in the US at 4.5%, not ruling out new moves to contain prices given the good evolution of employment
The world’s leading economic power, the United States, started 2022 with an interest rate of 0% and will finish this year with a reference rate between 4.25% and 4.5%. They are up 4.5 basis points in just 12 months, following the latest decision by the Federal Reserve (FED), which ended this complex year with another increase in the official money price. An additional 0.5%.
The FED has taken its foot off the pedal that has been accelerating rate hikes every two months for the past year. After three consecutive increases of 0.75 points, this time the increase was half a point. And while it hasn’t cut them – no agency or analyst expected it – it could mark the beginning of a trend reversal. The setting was forced by US inflation data, which showed its fifth month of moderation in November, at an overall rate of 7.1% compared to the same month last year.
In any case, this is the seventh consecutive rate hike the Fed has approved this year since it began raising the official money price in March in the face of skyrocketing inflation. The Fed is ending its monetary policy meeting this Wednesday and after the inflation data – which showed a price increase of 7.1% in November in 12 months compared to 7.7% in October – the market is expecting a half percentage point increase in interest rates.
In fact, the US central bank does not rule out further rate hikes. “The committee expects sustained increases in the target range to be appropriate to achieve a monetary policy stance tight enough to bring inflation back to 2% over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the time lags through which monetary policy affects economic activity and inflation, and economic and financial developments. clues, pending Powell’s press conference.
The institution seems to have a free hand in the rate hike process. Not just because inflation is still far from the 2% target. Also because the labor market is showing signs of strength despite fears of a recession. The United States has had 23 consecutive months of job creation and the unemployment rate stands at 3.7%, very close to the minimum of the last half century. At the same time, however, both the property market (highly sensitive to the price of money) and some other sectors are beginning to show signs of economic weakening.
This decision by the US FED paves the way for what the European Central Bank (ECB) will decide this Thursday. All analysts agree that Frankfurt will raise interest rates in the eurozone by another half a percentage point to 2.5%. Inflation in the Eurozone fell slightly to 10% in November after 17 consecutive months of increases. Due to the energy relief, prices are waiting for the new decision that the ECB will take.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
