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This Wednesday the minutes of the last meeting of the US central bank were published, revealing that the majority of the directors consider that “one or several” rises of half a point could be “appropriate”.
Between the sword and inflation. Everything seems to indicate that the officials of the United States Federal Reserve, Fed for its acronym in English, would opt for an aggressive approach to combat high inflation in the coming months, making loans more expensive for consumers and companies.
At the Fed’s last meeting on March 15-16, policymakers favored a half-point hike, according to the minutes, but abstained amid uncertainty over Russia’s invasion of Ukraine.
Instead, the Fed raised its key short-term rate by a quarter point and signaled that it planned to keep raising rates through 2023. The documents also reveal that the Fed will rapidly draw down its massive $9 trillion bond reserve over the next few years. months, a measure that would contribute to higher borrowing costs.
For Kathy Bostjancic, chief US financial economist at Oxford Economics, the Fed’s plans “reflect its great discomfort with the rapid pace of inflation.” According to her, the bank is “increasingly concerned” about the fact that consumers and businesses think that inflation will continue.
For many analysts, the main concern is that the Federal Reserve will act to curb inflation, and that it will react so aggressively that it causes a recession. Other analysts expect the economy to enter a recession next year and the Fed will be “well behind the curve now, it has given clear signs that it is shifting into a more aggressive tightening mode.”
Interest rates are what govern the costs of mortgages, car loans, credit cards, and business loans. With the hike, the Fed hopes to cool economic growth and wage growth enough to tame inflation.
Lael Brainard, a key member of the Fed’s Board of Governors, and other officials have also said they anticipate such sharp hikes, moves that Fed Chairman Jerome Powell has hinted at.
Treasury Secretary Janet Yellen, who chaired the Fed before Powell, suggested to Congress that Russia’s invasion of Ukraine will keep inflation rising for months to come. “The sanctions we have imposed on Russia are driving up the price of energy,” Yellen said. “When energy prices are going up, the price of wheat and corn produced by Russia and Ukraine are going up, and metals that play an important industrial role are going up,” she added.
The Consumer Price Index in the United States reached 7.9% year-on-year in February, the highest figure since 1982.
with AP
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