Dedicated to fighting the inflationthe US Federal Reserve (Fed) has decided raise the price of money again by 0.75 points, as it did last month. This is the fourth increase this year after those of 0.25 points in March, which began the new cycle after four years without movements in this regard; 0.50 in May and 0.75 in June, which was the highest rise in 28 years. With this decision, with which it certifies its commitment to combat price escalation, the interest rate is between 2.25% and 2.50%above the pre-pandemic levels. The president of the entity, Jerome Powellhas started his press conference by insisting on the Fed’s commitment to tame inflation, even despite the fact that economic activity shows signs of further weakness.
The central bank of the world’s leading power assures that “the recent spending and production indicators have softened. However, job creation has been strong in recent months and the unemployment rate has remained low“. In any case, the great challenge is inflation, which “remains highreflecting supply-demand imbalances related to the pandemic, rising food and energy prices, and broader price pressures.”
The entity, which does not rule out new increases, highlights the impacts of Russia’s war against Ukraine. And he stresses that he seeks to “achieve maximum employment and inflation at a rate of 2% in the long term.” “The committee (the body that decides on interest rates) is firmly committed to bringing inflation back to its 2% target“, he insists. And he has assured that in the current circumstances, monetary policy decisions will be made “from meeting to meeting” with the available data without guidance for a longer term, as the European Central Bank (ECB) has also said. .
Last month, Powell announced that the agency will maintain its policy of raising interest rates even at the risk of the country entering a recession, a scenario that he did not rule out, although today he has been convinced that it can be avoided. Inflation of 9.1% in June, at the level of 40 years ago, unleashed all the alarms. And even more worried 5.9% of core inflationwhich excludes the most volatile elements such as energy and unprocessed food, which implies the transfer of the rise in prices to the economy as a whole.
The priority of the monetary authority is to combat a inflation that is unhinged But unlike in Europe, where the problem is offerin the US it is because demand acceleration by high employment, which is overheating the economy. After announcing the US stock market, it has strengthened its upward trend.
The Fed increased the price of money by 75 points last month, which had not happened for 28 years, to 1.5% and 1.75%. In turn, he anticipated that at Wednesday’s meeting the new increase would be 0.5 or 0.75 points. And he has opted for the top of the fork.
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The European Central Bank (ECB), which has chosen to tighten its monetary policy later, agreed last week to an increase of 0.50 points, double what its president had announced, Christine Lagarde, closing an 11-year cycle of cheap money and marking the largest one-time increase in 22 years. At the same time, it approved a mechanism to avoid possible escalations in the risk premium of countries in the euro zone.
This differential between the dollar area and the euro area has strengthened the US currency, which recently reached parity with the common European currency for the first time in 20 years.