US Federal Reserve increases price
WASHINGTON – The US Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, predicting that by the end of the year, the policy rate would be in the range of 1.75 percent to 2 percent, signalling a more aggressive stance against inflation that will push borrowing costs to restrictive levels in 2023.
The US central bank acknowledged the massive uncertainty the economy faces as a result of the war in Ukraine and the ongoing health crisis in a new policy statement marking the end of its full-fledged battle against the coronavirus pandemic, but said “ongoing increases” in the target federal funds rate “will be appropriate” to contain the highest inflation in 40 years.
Instead of mentioning the coronavirus epidemic directly, the statement highlighted the crisis in Ukraine as putting “further upward pressure on inflation” and dragging on economic activity.
US Federal Reserve
The interest rate path shown in new projections by policymakers is more difficult than expected, reflecting Fed concerns about inflation moving faster and threatening to become more persistent than expected, jeopardising the central bank’s hopes for a quick exit from the emergency policies put in place to combat the pandemic’s aftermath.
Even with the more aggressive rate hikes presently predicted, inflation is expected to continue above the Fed’s 2% objective, staying at 4.1 percent this year and only falling to 2.3 percent by 2024. This year’s economic growth is expected to be 2.8 percent, down from the 4.0 percent forecast in December.
The unemployment rate is expected to fall to 3.5 percent this year and stay there next year, before slightly rising to 3.6 percent in 2024.
The Fed plans to begin lowering its almost $9 trillion balance sheet “at a coming meeting,” according to the latest statement, a topic that Fed Chair Jerome Powell is expected to discuss further at a press conference scheduled to begin at 2:30 p.m.