The goal is to tackle inflation, which jumped to 8.5% in March, as it had not happened since 1981. It is “really too high” and must be reduced “quickly”, warned the president of the American central bank, Jerome Powell.
Rome – The Federal Reserve raised the key interest rates on the Fed Funds by 0.50% bringing them within a range of 0.75 to 1% and announced that it will start reducing its budget from June.
The half point refinement, decided unanimously, was expected by the market and represents the largest intervention since May 2000. The goal is fight inflationwhich rose in March to 8.5%, as it had not happened since 1981. It is “really too high” and must be reduced “quickly”, warned the president of the American central bank. Jerome Powell.
For this reason, he said at a press conference, further adjustments upwards of 0.50% of the cost of money “will be on the table” of the US central institution also on the occasion of the “next two boards”, scheduled for mid-June. and at the end of July. For the moment, however, he specified, the Fed “is not actively considering” a 0.75% rise, the real bogeyman feared by investors.
The war in Ukraine and the new lockdowns imposed by the Chinese authorities to counter the resurgence of the coronavirus pandemic represent as many upside risks for consumer prices. But Powell is confident that the Fed has the tools to counter the rush in the cost of living and that it will be able to bring it back under control “without causing a recession”.
The Stars and Stripes economy is “strong and well positioned,” he noted. Despite the 1.4% decline in GDP on an annualized basis in the first quarter, the Fed chairman explained, “consumer spending and corporate fixed investments remained strong“and” labor market earnings have been robust. “
The reduction in the institute’s budget will also counteract the price rush, which shot up to the stratospheric figure of about 9 trillion dollars to support the economy during the crisis caused by Covid. The squeeze will be $ 47.5 billion a month in June, July and August and will accelerate to $ 95 billion from September.