The Fed raises rates by 0.75 points
Fed leaders believe that further rate hikes are expected.
The US Federal Reserve (Fed) has again raised its key rate by three-quarters of a point for the third time in a row. percentage on Wednesday. The federal institution “anticipates that additional increases will be necessary”.
Rates are now in a range between 3% and 3.25%, while inflation is now expected to be 5.4% this year, down from the 5.2% forecast so far.
The Fed now anticipates near zero growth for 2022 (+0.2%), compared to the 1.7% rate forecast in June.
Institution officials estimate they will raise their benchmark rate to 4.4% by the end of the year, a full percentage point higher than what is expected. was expected last June.
In 2023, this rate is expected to reach 4.6%, the highest level since 2007.
The Federal Reserve's move follows the release of a government report last week that showed that price increases were continuing to mount across large swathes of the economy and that those increases were continuing. on the side of rents and other services at a time when other factors that normally fuel inflation, such as the price of gasoline, had lost their intensity.
< p class="e-p">By raising its borrowing rates, the Fed is making it more expensive to take out loans to buy a car or a house or to finance a business.
Consumers and companies are then expected to borrow and spend less, which would slow the pace of the economy and reduce inflation.
At a press conference, Fed Chairman Jerome Powell said that before the Federal Reserve considered ending its hike rates, it wants to have firm confidence that inflation is returning to its 2% target.
Fed officials say they are aiming for a soft landing in which they manage to slow growth enough to calm inflation, but not overdo it to avoid triggering a recession.
However, more and more economists are saying that the Fed's high rates will eventually lead to job losses, which will increase the unemployment rate in addition to triggering a real recession later this year or early 2023.
No one knows if this process will lead to a recession or, if so, how big that recession would be, Powell continued. It will depend on how quickly we manage to reduce inflation.
Jerome Powell, Chairman of the US Federal Reserve
In their new economic forecast, Fed officials not only expect near-zero growth for 2022 but also a rise in the unemployment rate by the end of 2023 to 4.4% from 3. 7% right now.
Historically, some economists say, every time the unemployment rate has increased by half a percentage point over several months, a recession has always followed.
The powerful institution has hammered it: the fight against inflation is its priority. Letting it take hold would entail even more painful measures for households and businesses, as was the case 40 years ago, after years of soaring prices that sometimes approached 15%.
Gasoline prices have stopped rising and have even fallen all over the United States.
The U.S. Federal Reserve, like its counterparts around the world, is trying to rein in inflation driven by COVID-19-related supply chain disruptions and exacerbated by rising energy and food prices with the war in Ukraine.
Many central banks are meeting this week, including on Thursday the bank England (BoE) and Japan (BoJ). On Tuesday, the bank of Sweden, the Riksbank, had created the surprise with an unprecedented increase of one point.
At the beginning of September, the European Central Bank (ECB) had raised its rate by three quarters of a percentage point, unheard of.
The Bank of Canada is not to be outdone: it has increased its key rate by three quarters of a point it too, on September 7, to raise it to 3.25%.
With information from Agence France-Presse, and Associated Press