The Fed is announcing the biggest interest rate hike since 1994, signaling a slowdown in the economy, Reuters reports.
The Federal Reserve on Wednesday approved the largest interest rate hike in 28 years to halt rising inflation, which U.S. central bank officials have acknowledged could erode public confidence in their power and is driven by events that are rife. they seem to be getting out of hand more and more.
The expected large-scale move increased the federal funds rate by three-quarters of a percentage point to a range of 1.5% to 1.75%, which is still relatively low by historical standards.
But the Fed’s hawkish commitment to controlling inflation has already triggered a sharp tightening of lending conditions, which is being felt in the US real estate and stock markets and is likely to slow demand across the economy.
Officials also expect steady rate hikes by the end of this year, perhaps including an additional 75 basis points, with a federal funding rate of 3.4% at the end of the year. This would be the highest level since January 2008 and enough, the Fed projections show, to significantly slow down the economy in the coming months and lead to rising unemployment.
“We are not looking to leave people out of work,” Fed Chairman Jerome Powell told a news conference after the Fed’s last two-day monetary policy meeting, adding that the central bank “is not trying to induce a recession.” “.
However, the Fed chief’s comments were among the most sober so far about the challenge he and his colleagues are facing to reduce inflation from the current level to a level closer to the 2% target, without a slowdown sudden rise in economic growth or a sharp rise in unemployment.
“Our goal is really to bring inflation to 2% while the labor market remains strong … What is becoming increasingly clear is that many factors that we do not control will play a very important role in deciding whether this is possible or not, “said Powell, referring to the war in Ukraine and global supply concerns.
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