The US Federal Reserve raises its key rates between 2.25 and 2.50%


The US Federal Reserve raises its key rates between 2.25 and 2.50%

The US Federal Reserve is trying to put the brakes on inflation, which crossed 9% last June.

Faced with the ever-increasing price spike in the United States, the American central bank is increasing its key rates by 0.75 percentage points, which are now within a range of 2.25% to 2.50%.

This is the Fed's fourth attempt this year to calm inflation, which hit 9.1% in June in the United States, the highest it has been in over 40 years.

The Monetary Committee of the Federal Reserve (Fed) plans to continue this strategy to combat the galloping rise in the cost of living. The Fed boss even warned of an unusually high rise at the next committee meeting in September.

Inflation is far too high, said Jerome Powell, acknowledging that the latest inflation barometer was even worse than expected.

This tightening of the monetary policy is taking place just as the US economy has begun to slow, increasing the likelihood that rate hikes will lead to a recession later this year or next.

Recent spending and production indicators have slowed. However, job creations have remained robust in recent months, and the unemployment rate is still low, reads a statement from the US Federal Reserve.

This decision, taken unanimously by the 12 voting members of the Fed's monetary committee, aims to make credit more expensive by raising interest rates in a controlled way to slow consumption and ease the pressure that affects prices.

Policy rates had been urgently lowered to between 0 and 0.25% in March 2020, to support the economy in the face of the COVID-19 crisis, and remained virtually unchanged until last March .

The Fed hopes for a soft landing, but the economic slowdown it is betting on to lower prices could put too much pressure on the job market .

We are not trying to cause a recession, defended the boss of the Fed, assuring that the United States was not currently in recession. We believe there is a path to lower inflation while supporting a strong job market, he said.

Janet Yellen, Secretary of the Treasury, agrees. She believes that the good health of the American economy should allow the country to escape the recession.

This is not the opinion of the International Monetary Fund (IMF) for which the current environment suggests that the possibility of the United States escaping recession is thin.

The institution has even lowered its growth forecast for the United States in 2022 and now only expects 2.3%.

Gross domestic product (GDP) growth in the second quarter will be released on Thursday. It should be very slightly positive, after a negative first quarter (-1.6%).

With information from Agence France-Presse, and La Presse canadienne


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