Fed raises US interest rates by 0.75 percentage point

The Federal Reserve raised the benchmark interest rate by 0.75 percentage point on Wednesday (27), in an effort to cool the most intense inflation in the United States since the 1980s, with “continued increases” in borrowing costs still to come despite the economic slowdown.

“Inflation remains high, reflecting pandemic-related supply and demand imbalances, higher food and energy prices and broader price pressures,” the Federal Open Market Committee (FOMC) said as it raised the rate. benchmark at an interval between 2.25% and 2.50%, in a unanimous vote.

The Fomc added that it remains “highly attentive” to inflation risks.

But while job creation has remained “robust”, officials noted in the new monetary policy statement that “recent spending and production indicators have slowed”, a nod to the fact that the aggressive cycle of interest rate hikes that have put in place since March is starting to take its toll.

After a 75-percentage-point hike last month and smaller moves in May and March, the Fed has raised the benchmark rate by a total of 2.25 points this year as it battles a burst of inflation like the one seen in the decade. 1980s with a monetary policy in the style of the time.

The interest rate is now at the level that most policymakers consider to have a neutral economic impact, marking the end of pandemic-era efforts to encourage household and business spending with cash.

The statement gave little explicit guidance on what steps the Fed might take next, a decision that will largely depend on whether or not the next economic figures show that inflation has begun to slow.

With the latest data showing consumer prices rising at an annual rate of more than 9%, investors expect the US central bank to raise the policy rate by at least 0.50 percentage point at its September meeting.

Fed Chair Jerome Powell can provide more details at a press conference starting at 3:30 pm ET.

*Reproduction of this content is prohibited.

Translated to english by RJ983

From Brazil, by EBC News

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