The US Federal Reserve on Wednesday raised its target interest rate by three-quarters of a percentage point.to a range of 3%-3.3%, and new projections indicate that borrowing costs will advance as much as 4.4% by the end of the year before eventually peaking at 4.6% in 2023.
While, the central bank’s quarterly projections calculate a slowdown in GDP growth to 0.2% this year to recover to a 1.2% expansion in 2023, well below output potential.
Also, The entity expects the unemployment rate to rise to 3.8% this year and stand at 4.4% in 2023. Inflation, on the other hand, will slowly return to the Fed’s 2% target in 2025.
The projected fed funds rate for the end of this year indicates cost of credit increases by another 1.25 percentage points in the Fed’s remaining two policy meetings through 2022, a level that implies another 75 basis point increase to the view
“The committee is strongly committed to returning inflation to its 2% target.“said in a statement the Federal Open Market Committee (FOMC) in announcing its third consecutive rise of 75 basis points, above the quarter percentage point increases typical of monetary tightening cycles in the United States.
The Fed “anticipates that current increases in the target range of the fed funds rate will be appropriate,” the panel said, reiterating its position from its previous statement in July.
Updated projection points to protracted Fed battle to quell highest inflation since 1980s0, and which could possibly bring the economy to at least the brink of a recession.
Source: Ambito
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