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WASHINGTON — The U.S. central bank raised rates a quarter-point on Wednesday at its first meeting of the year, a slower pace from previous hikes because while inflation remains high, it shows signs of easing. moderation, as well as economic activity.
“Inflation has slowed a bit, but remains high,” said the Fed’s monetary policy committee, the FOMC, in its statement.
Moreover, “recent indicators show moderate growth in spending and production,” say officials of the monetary institution.
In other words, the situation is improving, but it is too early to claim victory.
And Fed officials have signaled that further hikes are to be expected.
With this eighth hike in a row, the Fed’s rates, which were at zero just a year ago, are now in a range of 4.50 to 4.75%, following a decision taken unanimously .
This increase of a quarter of a percentage point, however, marks a return to a more usual level of increase, following particularly strong increases of half a point and even three-quarters of a point.
The objective of rate hikes: to push banks to raise interest rates on loans to households and businesses.
To try to curb inflation, which in June had reached its highest level in more than 40 years, it was necessary to slow down consumption to prevent prices from continuing their dizzying escalation.
But with consumption driving the US economy, too much tightening might lead to a recession.
For Pierre-Olivier Gourinchas, chief economist of the International Monetary Fund (IMF), who published new forecasts on Tuesday, there is however still “a narrow possibility” for this scenario to be avoided.
Solid labor market
The state of the labor market, in particular, is being watched very closely by the Fed, following two years of worker shortages that pushed up wages, in the midst of high inflation.
Official employment figures for January will be released on Friday. The unemployment rate is expected to rise slightly, to 3.6%, a level however still among the lowest of the last 50 years. The number of job creations is expected to slow down to 187,000 once morest 235,000 in December, according to the consensus of Briefing.com.
In January, flooding in California and heavy snowfall in several states slowed job creation in the private sector, according to the monthly ADP/Stanford Lab survey published on Wednesday.
But “we see a job market still strong,” said ADP chief economist Nela Richardson. As for wages, they show a stable increase compared to December.
Another figure, published Tuesday morning by the Department of Labor, had seemed to persuade economists that inflation is now permanently on the right track: the average cost of an employee, with a rise in the fourth quarter less strong than those of the quarters previous ones.
The rise in consumer prices thus fell in December to 5.0% over one year once morest 5.5% the previous month, according to the PCE index, favored by the Fed, which wants to bring it back to around 2%.
Another measure of inflation, the CPI index, on which pensions are indexed, also showed a sharp slowdown in December, to 6.5% over one year once morest 7.1%.
Thursday is the ECB which will meet. The European institution started later than the Fed to raise its rates, and should raise them once more, and even hint at further hikes.
