It is increasing them by half a point to keep them in the 0.75%-1% range while anticipating more increases that would bring them closer to 2% by the end of July
The US Federal Reserve (Fed) raised the country’s interest rates by 50 basis points on Wednesday, to place them within a target range of 0.75% to 1%. It’s the biggest increase in money prices there since 2000, 22 years ago. Since then, rate hikes have always been limited to 25 basis point increments.
However, the news was expected weeks ago and is in line with this organization’s plans to tackle “too high” inflation, now 8.5% by the US CPI or 5.5% by the underlying index of personal consumption expenditure. The Fed’s Preferred Measure However, the Fed noted that although economic activity slowed between January and March, household spending and business investment have performed well. In addition, the increase in employment has been ‘robust’ in recent months.
In any case, the body chaired by Jerome Powell expects “it will be appropriate” to push through more price hikes at its next meetings — the next one from its federal open market committee will be on June 15. The market forecast is that official rates will hit 2% at the end of July and even reach 2.5% in early January. And meanwhile, they are watching this strategy with suspicion in Europe.
The other major measure taken this Wednesday by this monetary authority to halt and then reduce the price increase was to define the plan by which it will reduce its balance, which has risen to $9 billion (8.5 billion dollars) through asset purchases. billion euros). to tackle the crisis caused by covid-19. This will imply that there is more supply of bonds in the market, which will force them to give higher returns to investors and this in turn will force the price of money to harden.
For example, from June the maturities of the assets are reinvested, with the exception of a volume of 47,500 million dollars (45,000 million euros). Specifically, the Fed will stop reinvesting 30,000 million government bonds and 17,500 million mortgage securitisations. These discounts will last for three months.
From September, the monthly adjustment will be 95,000 million (90,017 million euros) per month: 60,000 million in government bonds and 35,000 million in securitisations. In any case, the Fed is “willing” to adjust the details of its balance sheet shortening based on economic and financial developments.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
