July 7, 2022

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Biggest rate hike in the US since 1994

Biggest rate hike in the US since 1994

The Federal Reserve raised its key interest rate in the United States by 75 basis points to a range of 1.50 to 1.75 percent, the Fed press release said. She also mentioned that the Fed is very committed to bringing inflation down to 2%.

decision about interest rates It was in line with market expectations and was voted down 9 to 1. Esther L. George voted against the decision, calling for an increase in interest rates. average of 50 basis points.

Biggest increase since 1994

This is the biggest interest rate hike. In the US since Alan Greenspan was chair of the Federal Reserve in 1994. In the last two meetings, the Fed has raised interest rates. by 25 basis points and 50 basis points, respectively.

“The FOMC has decided to raise the target range for the federal funds rate to 1.50-1.75% and expects further increases in the target range to be appropriate. In addition, the Committee will continue the process of reducing its resources from Treasuries, agency debt and bonds. Mortgage-Backed Agencies,” this was stated in the closing statement of the meeting.

“In assessing an appropriate monetary policy position, the Committee will continue to monitor the impact of incoming information on the economic outlook, and the Committee is prepared to adjust its monetary policy position accordingly when threats arise that may impede the achievement of the Committee’s objectives. The Committee’s assessments will take into account a wide range of information, including readings. health, the public, labor market conditions, inflationary pressures and expectations, financial and international developments, and the Committee is firmly committed to restoring inflation For a target of 2 percent ”- added.

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Federal Reserve Chairman Jerome Powell at the conferencePAP / EPA / JIM LO SCALZO

US interest rate hike

The Fed decided to raise the Reserve Excess Rate (IOER) by 75 basis points to 1.65%.

According to the Federal Open Market Committee, the Russian invasion of Ukraine is putting additional pressure on rising inflation.

The Russian invasion of Ukraine caused enormous human and economic suffering US economy Very uncertain. The invasion and related events put additional pressure on inflation and weighed heavily on global economic activity. Additionally, the COVID-19 restrictions in China are likely to exacerbate disruptions in the supply chain. The press release said the committee pays special attention to inflation risks.

Job growth in the US in recent months has been assessed as solid.

“General economic activity in the United States appears to have rebounded after the decline in the first quarter. Job growth has been robust in recent months and unemployment rates have remained low. Inflation remains elevated, reflecting supply and demand imbalances linked to the COVID-19 pandemic, higher energy prices and broader price pressure.

The Federal Reserve has introduced a new quarterly macroeconomic forecast and a dotted chart showing interest rate path expectations according to reserve members.

In June, the Federal Open Market Committee forecasts interest rates. In the United States, it increased by 3.4 percent. At the end of 2022, 3.8 percent at the end of 2023 and 3.4%. At the end of 2024. In March, the Fed predicted seven interest rate increases. By 25 basis points in 2022 and another three in 2023.

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The median forecast for long-term interest rates, ie, the neutral rate was 2.5 percent in March. compared to 2.4 percent in March.

The next meeting of the Fed is scheduled for July 26-27.

dollar exchange rate It rises against the basket of currencies after the Federal Reserve’s 0.14% decision. to 105.69 points, and the yield on the 10-year Treasury bill fell 4 basis points to 3.43%.

Main image source: PAP / EPA / JIM LO SCALZO