In a new policy statement marking the end of its full-scale fight against the coronavirus pandemic, the US central bank signaled the enormous uncertainty facing the economy from the war in Ukraine and the ongoing health crisis, but still said “ongoing increases” in the Federal Funds rate target will be “appropriate” to curb the highest inflation in 40 years.

The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday and forecast its key rate to reach between 1.75% and 2% by the end of the year, in a new aggressive stance on inflation that will push borrowing costs up to 2023. will increase restrictive levels.

In a new policy statement marking the end of its full-scale fight against the coronavirus pandemic, the US central bank signaled the enormous uncertainty facing the economy from the war in Ukraine and the ongoing health crisis, but still said “ongoing increases” in the Federal Funds rate target will be “appropriate” to curb the highest inflation in 40 years.

The statement dropped direct reference to the coronavirus pandemic, instead citing the war in Ukraine as creating “additional upward pressure on inflation” and weighing on economic activity.

The rate path shown in new projections by policymakers is more difficult than expected, reflecting the Fed’s concerns about inflation that has risen faster and threatens to become more persistent than expected, and the central bank’s hopes of an easy shift from jeopardizing emergency policies designed to combat the effects of the pandemic.

Even with tougher rate hikes now forecast, inflation is expected to remain above the Fed’s 2% target, falling to 4.1% this year and falling only to 2.3% through 2024. Economic growth is at this year’s rate 2.8%, a sharp drop from the 4.0% growth forecast in December.

The unemployment rate will fall to 3.5% this year and will remain there next year, but is expected to rise slightly to 3.6% in 2024.

The new statement said the Fed expects to begin reducing its balance sheet by nearly $9 trillion “at an upcoming meeting,” a topic likely to be discussed further by Fed Chair Jerome Powell at a news conference scheduled for 2:30 p.m. EDT. (6:30 p.m.) begins. GMT).

St. Louis Fed President James Bullard was the only policymaker to disagree with the Fed’s decision.


This post US Fed raises rates by 25 bps, but expects stricter gains path; signals aggressive turn against inflation was original published at “https://www.financialexpress.com/economy/us-fed-raises-interest-rate-25-bps-but-projects-tougher-hike-path-signals-aggressive-turn-against-inflation/2463452/”

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