The US Federal Reserve has raised interest rates significantly in the fight against rampant inflation. It increased it by 0.75 percentage point on Wednesday for the third straight month. The new range is now 33 to 3.25 percent. The Fed has also raised its inflation forecast for this year and lowered that for economic growth.
All in all, it was the fifth rate hike this year. The US Federal Reserve is committed to the goals of price stability and full employment.
The inflation problem in the US is proving more persistent than expected, with prices rising 8.3 percent recently. In their interest rate outlook, the currency watchdogs also indicated that they would step up their efforts and plan to raise the price of money to an average level of 4.4 percent by the end of the year.
In the longer term, the key interest rate should be 2.5 percent
By the end of next year, the key rate is expected to reach 4.6 percent, which has fueled market speculation about possible cuts in the second half of 2023. In the long term, the key rate should level off at 2.5 percent, according to monetary watchdog forecasts. There are fears in the financial markets that an overly aggressive approach could bring the economy to a standstill.
Meanwhile, the Fed is forecasting significantly lower economic growth this year than it had assumed just three months ago. The gross domestic product (GDP) of the world’s largest economy is expected to grow by 0.2 percent. That would be 1.5 percentage points less than forecast in June. In the previous year, as part of the recovery from the corona crisis, the economy had grown by a strong 5.7 percent.
In addition, the US Federal Reserve sees slightly higher inflation in the current year than was assumed three months ago. Despite the hikes in the key interest rate, inflation is expected to average 5.4 percent in 2022, an increase of 0.2 percentage points compared to the earlier forecast in June.
Core inflation, excluding food and energy prices, is expected to be 4.5 percent this year. Since the start of the corona pandemic, the Fed has had to adjust its inflation forecast upwards several times. The Fed is committed to the goals of price stability and full employment.
Source: Krone
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.
