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The Federal Reserve, the equivalent of the Central Bank in various countries, announced a 50 basis point hike in the reference interest rate as part of the fight against inflation. The increase, released after the conclusion of the two-day monetary policy meeting, is the highest since May 2000.
In a movement expected by analysts and markets, the United States Federal Reserve (Fed) increased interest rates by half a point, an increase that doubles the increase announced last March, the first increase in the indicator since December 2018, and that now leaves the interest rate in a range between 0.75 and 1%, the highest point since the pandemic began just over two years ago.
The announcement, expected by analysts and markets, goes directly to the Fed’s plans to reduce high inflation which, pending the data for April, was in the order of 8.5% year-on-year in March, the highest figure in the last 40 years within the American Union.
“Inflation is too high and we understand the hardship it is causing and we are moving quickly to bring it down. We have the tools we need and the determination it will take to restore price stability on behalf of American families and businesses. The economy and The country has been through a lot in the last two years and they have proven to be resilient,” said Jerome Powell, chairman of the Federal Reserve during the press conference in which he made the announcement.
Powell, during his meeting with the media, stated that new increases of half a point in interest rates “are on the table” in the next meetings. His plan, according to some media, including El País of Spain, is to place the figure in a range of 1.75-2% in the month of July.
For a group of specialists, and journalists, the aggressive rise in interest rates, which seeks to cut the liquidity with which the market was flooded during the pandemic, could lead the US economy into a recession, something that was ruled out by Powell .
“It’s a strong economy and nothing suggests it’s close to or vulnerable to a recession. Now of course given events around the world and the fading effects of fiscal policy and higher rates, you could see a slower economic activity,” the Federal Reserve chairman said.
What impact does the measure have for the citizen and what effect could it have in Latin America?
It is worth mentioning that the economic impact of the pandemic led institutions to flood the market with liquidity, causing high consumption. Now, with the increase in the interest rate, the Fed seeks to reduce consumption.
On the other hand, with a high interest rate, the costs of borrowing money increase, generating a reduction in the credit application.
“As credit becomes more expensive, the average American must slow down his consumption in this way, let us remember that the American borrows to consume,” financial analyst Luis Gonzali told France 24.
On the other hand, unlike previous occasions, this rise in the interest rate will not have immediate effects for Latin America since, for the same reason of inflationary pressures, many governments in the region had already advanced a rise in the rate of interest.
“Previously, Latin America and emerging markets had to raise rates to prevent their currency from depreciating,” added the specialist.
In the midst of this news, it was learned that the Central Bank of Brazil increased its interest rate by one percentage point to 12.75%, being the tenth consecutive increase to combat inflation, which stood at 11.3 year-on-year. % In March.
With Reuters, AP and AFP
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