Fed will continue to gradually raise interest rate
2023.02.01 14:32
Fed will continue to gradually raise interest rate
By Ray Johnson
Budrigannews.com – On Wednesday, the Federal Reserve increased its target interest rate by a quarter of a percentage point, but it continued to promise “ongoing increases” in borrowing costs as part of its ongoing fight against inflation.
In a statement that marked an explicit acknowledgement of the progress made in reducing the pace of price increases from the 40-year highs reached last year, the U.S. central bank stated, “Inflation has eased somewhat but remains elevated.”
The Fed stated, for instance, that Russia’s war in Ukraine was still viewed as contributing to “elevated global uncertainty.” However, the war and the COVID-19 pandemic were omitted from earlier statements by policymakers as direct causes of rising prices.
Still, the Federal Reserve stated that policymakers were “highly attentive to inflation risks” and that the U.S. economy was experiencing “modest growth” and “robust” job gains.
According to the Federal Reserve’s statement, “The (Federal Open Market) Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
The decision increased the benchmark overnight interest rate to a range of 4.50 percent to 4.75 percent, a move that was widely anticipated by investors and signaled by U.S. central bankers in advance of the two-day policy session this week.
However, the Federal Reserve defied investor expectations that it was prepared to signal the end of the current tightening cycle in light of the fact that inflation has been steadily declining for six months in order to keep its promise of additional rate hikes.
The statement did say that any future rate increases would be in quarter-percentage-point increments, but it didn’t say how fast they would happen. Instead, it said how much the rates would change.
But those, it said, would take into account how the policy changes had affected the economy so far. It also said that future rate increases would be linked to how economic data would change.
The Federal Reserve hopes to keep bringing inflation down to its target of 2% without causing a severe recession or a significant rise in the unemployment rate from the current 3.5%, which is a level that has rarely been seen in recent decades. In December, inflation slowed to a 5% annual rate using the Fed’s preferred measure.
On Wednesday, the policymakers at the U.S. central bank did not issue any new economic projections.
To discuss the most recent policy decision, Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 p.m. EST (1930 GMT).
