The members of the Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) decided to raise the Federal Funds rate by another 75 basis points on Wednesday.
Since March of this year the central body has accumulated 300 basis pointsand after this rise, the benchmark is currently located in a range of 3.0 to 3.25 percent, from 2.25 to 2.5 percent previously.
With this, the Federal Funds rate has reached its highest level since January 2008, and the fastest pace of rates since records have also materialized, since on no other occasion has the Fed raised the benchmark by 75 basis points in three times in a row.
The market was already discounting this increase, after the president of the US central bank, Jerome Powell, made it clear that they would do everything possible to mitigate the inflationary pressures seen recently.
In August, the consumer price index registered an annual rise of 8.3 percent, which implies a clear improvement compared to the 9.1 and 8.5 percent registered in June and July, respectively; however, inflation in the American Union still continues at levels not seen in just over four decades.
Given this complex inflation scenario, the market is already betting that the Fed would close with a rate above 3.5 percent this year.
Recession at the door: Fed estimates that this 2022 the US GDP will grow only 0.2 percent
The United States Federal Reserve (Fed) adjusted its growth estimates on Wednesday, along with a new monetary policy announcement.
According to the agency, for this year the US economy would grow only 0.2 percentand which contrasts with the 1.7 percent projected in June.
For 2023, an advance of 1.2 percent is expected, a drop of 50 basis points compared to the previous 1.7 percent.
It also forecasts that general inflation will close this year at 5.4 percent, and no longer at the 5.2 estimated two months ago.
It is due to these factors that 18 of the 19 members of the Committee estimated that the Federal Funds rate would close this year above 4 percent.
Fed rate, ‘eye’ to this data: US inflation rises to 8.3% in August
The inflation from United States was firmer than expected in August, which probably kept the Federal Reserve (Fed) on track for a third consecutive interest rate increase of 75 basis points.
The consumer price index increased 0.1 percent from July, after no change in the previous month, Labor Department data showed on Tuesday. From a year earlier, prices rose 8.3 percent, a slight slowdown.