The Federal Reserve (US central bank) Wednesday increased its reference rates by a quarter of a percentage point, and announced that it expects new increases after this eighth consecutive rise, in a context of inflation that is moderating «but remains high.» Fed rates have now reached a range of 4.50 and 4.75 percent.
(Also read: Banco de la República completes its 12th rate hike and takes it to 12.75%)
«Recent indicators show a moderate growth in expenses and production,» remarked the Fed Monetary Policy Committee (FOMC) in a statement after two days of meeting, the first of the year. «Inflation moderated a bit but remains high,» the agency added.
For this reason, the committee «anticipates» that the new rate increases «will be appropriate» to drive inflation to the 2 percent annual target, the text explains.
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The Fed has raised benchmark interest rates eight straight times since March 2022, including four straight increases of 0.75 percentage points, in an attempt to cool the economy and contain inflation.
Make the credit more expensive It means discouraging consumption and investment, and removes pressure on prices. This quarter-point increase announced Wednesday marks a moderation from December’s half-point increase and larger increases last year.
Inflation in December was 5 percent at 12 months compared to 5.5 percent in the rolling year ending in November, according to the PCE indexwhich is the most followed by the
fed.
The fighting continues
Although the recent data is «encouraging,» «more evidence will be needed to convince us that inflation is moderated in a lasting way», due to the president of the organization, Jerome Powell, at a press conference after the release of the statement.
The Fed wants «concrete evidence that they contained inflation, and they don’t have it yet,» he summarized on his side. Ryan Sweet, Chief Economist at Oxford Economicsin dialogue with AFP.
Sweet expects utility costs to keep the Fed on the path of raising interest rates. In fact, Powell himself concluded that there will be «several» additional interest rate hikes.
Some analysts anticipate that the central bank waits for the strength of the labor market to subside in order for wage pressures to ease, before changing its course of action.
But so far, the unemployment it remains at historical lows of 3.5 percent. On Wednesday, the monthly ADP/Stanford Lab survey still showed job creation eased with Late States in January in the private sector in the United States, with 106,000 jobs created versus 253,000 in December, according to upwardly revised figures.
But the data is partly explained by the impact of the weather on hiring, he explained. Nela Richardson, ADP Chief Economist.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, says it’s time for a pause on rate hikes, saying in a tweet on Tuesday that «their (Fed’s) job is done.» «They contained inflation expectations,» he said.
«Any further Fed rate hikes from now on only increase the chance of a necessary recession» in the United States, he stressed.
AFP
