(Finance) – The US central bank has raised interest rates by 75 basis points, a level above consensus by 50 basis points. However, in recent days expectations had shifted towards the increase actually decided by the FED, also due to persistent rumors that had not been denied by the FED. The Federal Open Market Committee has therefore raised its reference rate to a range between 1.5% and 1.75%. Persistently high inflation forced the Federal Reserve to realize its largest increase in a single meeting since 1994.
The Monetary Policy Committee “predicts that continued increases in the target range will be appropriate“Reads the statement released at the end of the two-day meeting. In addition, the Committee” will continue to reduce its holdings in Treasury and agency debt and agency mortgage-backed securities, as described in the Reduction Plans. of the size of the Federal Reserve’s balance sheet issued in May – it is added – The Committee is firmly committed to bringing inflation back to its 2% target“.
Regarding the analysis of the health of the economy, it is pointed out that overall economic activity “appears to have recovered after the slowdown in the first quarter” and that there has been robust job creation in recent months, with a unemployment rate remained low. “Inflation remains highreflecting the imbalances in supply and demand linked to the pandemic, the increase in energy prices and the wider pressures on prices “, is highlighted. The invasion of Ukraine by Russia and the Chinese lockdowns linked to Covid are cited as elements that weigh on growth and inflation.
Jerome Powell, chairman, voted in favor of monetary policy action; John Williams, vice president; Michelle Bowman; Lael Brainard; James Bullard; Lisa Cook; Patrick Harker; Philip Jefferson; Loretta Mester; and Christopher Waller. TO vote against this action was Esther Georgewho preferred at this meeting to increase the target range for the federal funds rate by 0.5 percentage points from 1.25% to 1.5%.
According to “dot plot” the expectations of individual members, the Fed’s benchmark rate will close the year at 3.4%, an upward revision of 1.5 percentage points from the March estimate and implying a further tightening of 175 basis points this year. The committee therefore sees the rate rise to 3.8% in 2023, one percentage point higher. Officials also have significantly reduced their prospects for growth economic growth of 2022, now anticipating only a 1.7% increase in GDP, down from 2.8% in March. Unemployment could rise to 4.1% at the end of 2024 from 3.6%.