Federal Reserve to Raise Interest Rates Further Against High Inflation
The Federal Reserve, the US umbrella organization of central banks, will raise interest rates further on Wednesday to counteract high inflation in the United States.
The financial markets are eagerly awaiting the interest rate hike, as there is speculation that the central bank may raise interest rates even more than the Fed had previously indicated.
The turmoil about even stronger interest rate hikes by the Fed has kept investors in its grip for some time, resulting in sharp falls in the stock markets. Fed Chair Jerome Powell had previously said that interest rates could be raised by half a percentage point in June and July, depending on economic data. In March, the Fed already raised interest rates by a quarter of a percentage point, and in May it was added by half a percentage point.
But on Friday it was announced that inflation in the US rose further in May to 8.6 percent year on year, the highest level in more than 40 years. This is partly due to the high fuel prices due to the war in Ukraine. Foods have also become more expensive, causing many American households to see their purchasing power decline. Consumer economic confidence has plummeted and fighting inflation is his administration’s top domestic priority, according to President Joe Biden.
Economists and analysts at several major banks including Goldman Sachs and JPMorgan Chase now say they are forecasting a three-quarter percentage point rate hike. Powell has been criticized for allegedly acting too slowly to deal with high inflation.
The Fed’s two-day policy meeting started on Tuesday. The interest rate decision will be announced on Wednesday. Then Powell explains. The Fed is also releasing new economic expectations.