EconomyLast Minute: The Fed raises its interest rate by...

Last Minute: The Fed raises its interest rate by 75 points to contain inflation in the US

The United States Federal Reserve ( Fed ) raised its reference interest rate this Wednesday for the third consecutive time by 75 base points , to place it in a range between 3% and 3.25%, in an attempt to contain inflation in that country. which is at its highest levels in almost 40 years.

The new projections indicate that borrowing costs will advance to 4.40% by the end of the year before eventually peaking at 4.60% in 2023.

The current level of rates already raises doubts among analysts about whether it will affect US economic growth in the coming months and cuts are not expected until 2024.

The projected fed funds rate for the end of 2022 indicates cost of credit increases by another 1.25 percentage points in the Fed’s remaining two policy meetings through 2022, a level that implies another 75 basis point increase in the offing.

“The committee is strongly committed to returning inflation to its 2% target,” the Federal Open Market Committee (FOMC) said in a statement.

The Fed “anticipates that current increases in the target range of the fed funds rate will be appropriate,” the panel said, reiterating its position from its previous statement in July.

The updated projection points to a protracted battle by the Fed to quell the highest inflation since the 1980s, and one that could possibly bring the economy to at least the brink of a recession.

Federal Reserve Bank of Minneapolis President Neel Kashkari said Tuesday that his biggest fear is that the Fed and financial markets are underestimating underlying inflationary pressures, leading to even more aggressive interest rate hikes than expected. which is currently expected.

Raising interest rates to curb inflation is likely to dampen economic growth in the United States and the rest of the world, Citigroup Chief Executive Jane Fraser said on Wednesday.

“We are very concerned about the high prices that consumers are facing in the United States and indeed around the world,” Fraser said in response to a question during the House Financial Services Committee hearing.

With information from Reuters

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