The central bank already resorted to the sixth interest rate hike this year in an attempt to curb exceptionally strong inflation. HS will show the news agency Reuters’ live broadcast of the press conference starting at 20:15.
of the United States the central bank decided again on wednesday to strongly tighten monetary policy in order to curb the increase in consumer prices, i.e. inflation.
The Open Market Committee, which decides on monetary policy, raised the key interest rate by 0.75 percentage points, which was largely in line with financial market expectations.
The decision means that the key interest rate will be set in the range of 3.75-4.00 percent. The Open Market Committee’s decision was unanimous.
In its statement, the committee states that continuous interest rate hikes are necessary in order to sufficiently limit economic activity and bring inflation back in line with the central bank’s target.
Governor of the Central Bank Jerome Powell at the press conference, the focus is on what possible hints he gives about the tightening of monetary policy at the end of the year. Many economists and investors believe that the rate hike in December will be less than 0.75 percentage points.
HS will show the live broadcast of the central bank’s press conference by news agency Reuters starting at 20:15.
Today In 2016, the central bank has already tightened monetary policy six times. In March, it raised the key interest rate by 0.25 percentage points and in May by 0.50 percentage points.
Before Wednesday, it has resorted to exceptionally large interest rate increases of 0.75 percentage points in June, July and September. Before the current year, the central bank raised the key interest rate by 0.75 percentage points all at once in 1994.
The acceleration of inflation is due to supply disruptions in the global economy and high demand, which has been increased by fiscal stimulus, especially in the United States, after the coronavirus pandemic.
The economy is also overheated in the United States, as the demand for labor is greater than the supply.
In September consumer prices rose by 8.2 percent from a year ago and by 0.4 percent from August. Inflation is still the fastest in nearly 40 years.
The core inflation rate, closely monitored by economists and central banks, was 6.6 percent, compared to 6.3 percent in August. The acceleration indicates that the increase in prices is very wide-ranging. The impact of sensitively changing energy and food on consumer prices has been removed from core inflation.
According to the central bank’s price stability objective, the inflation rate should be two percent on average over a long period of time. However, preliminary data suggest that inflation may have slowed recently.
Based on the purchasing managers’ index, price pressure in industry calmed down significantly in October, as supply bottlenecks have eased and raw materials have become cheaper. The downside is that economic activity has also decreased based on the index.
Of everything nevertheless, a strong tightening of monetary policy is risky.
According to forecasts, economic growth in the United States is clearly slowing down this year, and noticeable increases in the key interest rate are likely to increase the risk of a recession.
Many economists have warned that the central bank, by strongly tightening monetary policy, may contribute to the economy’s descent into recession.
International the International Monetary Fund (IMF) estimated in mid-October in its economic review that the US economy will grow by 1.6 percent this year and 1.0 percent next year. Last year, the economy grew by 5.7 percent.
The IMF predicts that inflation in the United States will accelerate to 8.1 percent this year, but will slow down to 3.5 percent next year.
Despite the significant slowdown in economic growth caused by the energy crisis, the IMF urged central banks to focus strictly and steadily on taming inflation.
Also The European Central Bank (ECB) tightened monetary policy last week by 0.75 percentage points and plans to continue raising interest rates in December.
Several banks and investors estimate that the ECB will raise key interest rates by 0.50 percent in December, as economic growth in the euro area has slowed significantly due to the energy crisis.
The IMF predicts that the euro area economy will grow by 3.1 percent this year, but only 0.5 percent next year.
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