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.
“In the subsequent press conference, the president of the Federal Reserve, Jerome Powell, emphasized that the main objective of the Fed is to anchor expectations and lower inflation to the 2% target. In these terms, he stressed that, although In the long run, expectations seem to be anchored, the risk of not acting now could reverse this, and that a premature rate cut could reverse the work already carried out by the Fed”. held Lucas Buscaglia, Fixed income and macroeconomics analyst at IOL invested online.
“The most important data reported was on the rate hike forecasts for the coming years, where the members of the Board of Directors adjusted their forecasts upwards. With a more aggressive stance than that reported in June this year, they now forecast that the year will end with a rate of 4.4%, while 3.4% was expected in June Federal s projected for the end of this year indicates increases in the cost of credit by another 1.25 percentage points in the two monetary policy meetings remaining from the Fed through 2022, a level that implies another 75 basis point hike in the offing,” indicated the specialist.
“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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