In the fight against high inflation, the Fed is raising interest rates so sharply.
It decided on Wednesday to raise the rate by 0.75 percentage points to the new range of 1.50 to 1.75 percent. This unusually large step had been expected on the financial markets in view of the recent surprising increase in the rate of inflation to 8.6 percent.
At the same time, the monetary watchdogs signaled that they would make several additional payments this year in order to keep inflation in check. They are targeting an average interest rate level of 3.4 percent for the end of the year. In March, they had envisaged a value of 1.9 percent. In the longer term, an interest rate level of 2.5 percent is targeted. In March, the monetary authorities had targeted 2.4 percent.
Fear had recently spread on the financial markets that the central bank could tighten the reins in the fight against inflation so much that the economy threatened to slip into recession.
The US Federal Reserve is anticipating a higher inflation rate this year than assumed three months ago. Inflation is expected to average 5.2 percent in 2022, despite planned interest rate hikes, up 0.9 percentage points from the previous forecast in March, central bank data showed on Wednesday.
Core inflation, i.e. excluding food and energy prices, is expected to be 4.3 percent this year. The Fed has had to revise its inflation forecasts upwards several times since the beginning of the corona pandemic. The Fed is committed to the goals of price stability and full employment.
Source: Nachrichten
