WASHINGTON (dpa-AFX) – The US Federal Reserve has announced further major rate hikes. “Most participants felt that raising interest rates by 0.50 percentage points at subsequent meetings would probably be appropriate,” read Wednesday’s minutes of the FOMC’s most recent May 3-4 meeting. The swift reduction in monetary policy support for the economy should then allow the Fed to increase its monetary policy by the end of the year monetary policy to reevaluate.
The US Federal Reserve raised its key interest rate by 0.5 percentage points to between 0.75 and 1.00 percent at the most recent meeting. It was the second interest rate increase since the beginning of the corona pandemic – and the first increase of 0.5 percentage points in 22 years. Since then, the Fed has only raised interest rates by 0.25 points.
The reason for the decisive action is the very high inflation. The annual rate was 8.3 percent in April. The Fed is targeting a rate of 2 percent. Disruptions in supply chains and higher energy costs also fueled inflation. The war in Ukraine and the harsh corona policy in China contributed to this.
The US Federal Reserve is trying to cope with the strongest phase of inflation in 40 years without driving the economy into a recession. According to the protocol, however, a restrictive monetary policy could become necessary. However, this depends on the economic outlook. A restrictive monetary policy would dampen the economy in order to reduce inflation. The minutes refer to the labor market, where supply continues to outstrip demand.
The minutes were in line with expectations. The reactions on the financial markets were therefore limited./jsl/he