2023-07-26 18:46:58
This is the highest level since January 2001. The American central bank, the Federal Reserve (Fed), resumed, on Wednesday July 26, with rate hikes, pushing them to the highest level for twenty-two years for fight once morest inflation, following a pause in June, without however specifying whether it anticipates additional increases.
The Fed’s main policy rate, raised by a quarter of a percentage point, is now in the range of 5.25 to 5.5%. The decision was made unanimously by the eleven voting members of the monetary policy committee, the FOMC.
This is the 11th rate hike since March 2022, and Fed officials did not say in their statement whether they plan to raise rates further in the coming months. “The committee will continue to assess additional information and its implications for monetary policy”simply announced the institution in its press release.
Later, during a press conference, its president, Jerome Powell, made it known that the decision had no “not taken” as to a further increase at the next meeting in September, while inflation remains “much superior” to the objective of the central bank. There is still “a long way to go” before US inflation returns to the Fed’s 2% target, Powell repeated.
Lower inflation
This new increase will further push up interest rates on loans taken out by households and businesses. Nevertheless, the Fed’s monetary policy is bearing fruit: inflation fell in June to its lowest level since March 2021, at 3% over one year, according to the CPI consumer price index.
And core inflation, ie excluding food and energy prices, is still 4.8% over one year. Housing prices, for example, continue to rise. However, the Fed favors another measure, the PCE index, whose data for June will be published on Friday.
Jerome Powell had repeated in recent weeks that several increases were planned, “at least two, possibly in a row”. And, at the June meeting, most Fed officials agreed to hike rates to 5.5-5.75%, which would imply another hike following Wednesday’s.
GDP growth expected at 2%
The Fed rates were, until March 2022 and since the start of the Covid-19 pandemic, at zero, to stimulate economic activity through consumption, but the American central bank then gradually increased the cost of credit in the face of inflation at its highest for forty years. And to tighten too much, it is the recession which threatens, a risk which however seems to move away, according to certain economists. “Economic activity is progressing at a moderate pace”noted the Fed in its press release.
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Second-quarter US GDP (gross domestic product) growth will be released on Thursday morning, the day following the Fed meeting. Growth of 2% at an annualized rate is expected, as in the first quarter.
The next figures for inflation, but also for employment or growth, will be decisive. The International Monetary Fund (IMF), which published its updated forecasts on Tuesday, anticipates growth of 1.8% this year in the United States. The European Central Bank (ECB), which will meet on Thursday, a day following the Fed, also seems determined to continue raising rates.
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