The US central bank had prepared the markets in recent months for a cycle of rate hikes in the face of soaring inflation, which reached 7.9% in the United States in February over one year.
(Boursier.com) – The Federal Reserve on Wednesday raised its main interest rate, the “fed funds” rate, by a quarter of a point to bring it between 0.25% and 0.50%. This increase corresponds to what the financial markets had anticipated, the American central bank having prepared them in recent months for a cycle of rate hikes in the face of soaring inflation, which reached 7.9% in the United States in February. over a year.
This rate hike, the first in more than three years, in December 2018, was approved by all members of the FOMC Monetary Committee except one, the head of the St. Louis Fed. James Bullard, who came out in favor of a half-point raise.
Until recently, markets were expecting this tightening by half a point on Wednesday, but the Russian invasion of Ukraine on February 24 has reshuffled the cards by creating new uncertainties. on the economic outlook.
The Fed added in its statement that further rate hikes will be “appropriate” in the coming months to curb inflation. The new Fed projections show that central bankers see the fed funds rate close to 2% at the end of 2022, which would imply 6 more quarter-point hikes this year. Three more increases are in sight in 2023, but none in 2024.
The Ukrainian crisis is creating short-term inflationary pressures
The Fed noted in its press release that “job creation has been strong in recent months and the unemployment rate has fallen substantially. Inflation remains high, reflecting supply and demand imbalances linked to the pandemic. , higher energy prices and broader price pressures”.
The central bank is worried about the consequences of Russia’s invasion of Ukraine. “The implications for the US economy are highly uncertain“, writes the Fed, “but in the short term, the invasion and the events resulting from it are likely to create further upward pressure on inflation and weigh on economic activity“.
Fed Chairman Jerome Powell is due to comment on the day’s decisions and answer questions from the press at a conference from 7:30 p.m. French time.
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