Strong rate hike: the Fed announced another adjustment that shakes the world

Finally, the decision of the Federal Reserve of the United States was known. The entity announced this Wednesday another spike in interest rates with the aim of moderating the escalation of inflation in the United States, which was at the center of the financial market’s attention in recent times.

The US central bank authorized an increase in 75 basis points on the rates, the same proportion that had been validated at the end of last July, when it had applied the largest increase since the 1980s. In this way, the rate is located at a range between 3 and 3.25 percent.

Although this rate hike is in line with market expectations, what surprised was the projection. The head of the entity, Jerome Powell, indicated that the rates will stay high until the end of next year, while the market expected them to begin to give way from mid-2023.

more rate hikes

Going forward, interest rates are expected to continue rising further. The agency’s new projections indicate that the cost of borrowing advance to 4.40% by the end of this year, before eventually peaking at 4.60% over the next year.

Powell said during Wednesday’s conference that the Federal Reserve will do “everything possible to meet the objectives” of curbing the escalation of prices and indicated that the pace of rate hikes depend on data and perspectives emerging economies.

ECONOMIC DECELERATION

The US central bank estimated a slowdown in the growth of economic activity in that country, which would be 0.2% this year (in June, it had projected a rise of 1.7%), while maintaining its “strong commitment” to return inflation to its target of 2% per year, which it hopes to achieve by 2025.

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The entity indicated that inflation and unemployment will grow in the United States more than what was projected a few months ago. The Fed projected that the increase in prices will reach 5.4% this year, above the 5.2% that it had estimated in its previous meeting, while it forecasts that unemployment will rise to 3.8%.

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