The Fed raises interest rates 0.75 points to 3.25% and anticipates higher than expected increases

The Open Committee of the Federal Reserve (fed) of USA raised interest rates by 0.75 points, to the range of 3-3.25%, as expected by most of the expert consensus. The ascent is triple the usual, of the same magnitude as that of the July meeting and in order to curb inflation. This is the highest level since 2008, when the financial crisis occurred due to subprime mortgages.

The US CPI ended August at 8.3%, less than the 8.5% in July, but more than the 8.1% that the experts calculated. The biggest concern was core inflation, which discounts energy and food, which climbed to 6.3%, up from 5.9% a month ago and higher than the 6.1% projected by analysts.

The figures caused a large part of the market to change its interest rate forecast and estimate that the body chaired by Jerome Powell the price of money would rise one point, to the range of 3.25-3.50%, in what would have been the highest rise in the last 40 years.

The Fed anticipates a “continued” increase in interest rates and warns that it is willing to increase further “if risks arise that could prevent the achievement of the objectives,” the Committee statement states. In other words, if inflation continues to run wild and does not fall consistently to the medium-term target of 2%, the increases are here to stay.

Experts estimated that at the meetings on Wednesday, November 2 and 14, and December, the Fed would raise the price of the dollar in a smaller proportion, 0.50 points, but the words of the statement would erase the current estimates.

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The Committee’s assessments will take into account a “wide range of information” including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

The body that is “very attentive to the risks of inflation” recalled in its letter to the market that the latest published indicators point to a “moderate growth in spending and production”, which served the Fed as an argument to continue with a policy restrictive monetary

“Job creation has been solid in recent months and the unemployment rate has remained low”, thus arguing that the United States is prepared for higher rates, although the US economy is already in a technical recession by chaining two quarters consecutive economic contraction.

“Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising food and energy prices, and broader price pressures,” says a Committee noting that the war of Russia against Ukraine it is causing “tremendous human and economic hardship.” The war and related events “are creating additional upward pressure on inflation and are weighing on global economic activity,” they say.

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