Business

Due to the persistence of inflation in the US, the Fed will accelerate the end of the programs it launched due to the pandemic

A man walks in front of the Federal Reserve headquarters in New York (Photo: Reuters)
A man walks in front of the Federal Reserve headquarters in New York (Photo: Reuters)

The Booking United States Federal accelerate the rate at which it is withdrawing its support for the post-pandemic US economy as the inflation increases, and he hopes to raise interest rates three times next year.

In an abrupt change of policy, the Federal Reserve announced Wednesday that it will reduce its monthly bond purchases by double the pace it had previously announced, and will likely end in March.

The bond purchases were intended to keep long-term interest rates low for ahelp the economy, but they are no longer needed, as unemployment is falling and inflation is at a nearly 40-year high. The fast-paced schedule puts the Fed on the path of starting to raise rates in the first half of next year.

The Fed’s new forecast of raising its short-term benchmark interest rate three times next year is higher than the only rate hike that I had forecast in September. The Federal Reserve’s benchmark interest rate, now close to zero, influences many consumer and business loans, whose rates will likely go up as well.

The policy change that the Fed announced in a statement after its last meeting had been noted in the testimony that President Jerome Powell gave to Congress two weeks ago. The change marked Powell’s recognition that, with increasing pressures inflationists, the Fed needed to start tighten credit for consumers and businesses faster than I had thought a few weeks earlier.

In the new economic projections for the United States, released at the end of a two-day monetary policy meeting, officials expect inflation to remain at 2.6% next year, in front of 2.2% expected in September, and that the unemployment rate will drop to 3.5 percent.

As a result, the median Fed authorities projected that the overnight benchmark interest rate would have to rise from its current level close to zero to 0.9% by the end of 2022, with increases that will continue in 2023 to a 1.6% and in 2024 to a 2.1%, to try to bring inflation back to the target of the central bank of the 2 percent.

Eventual rate hikes, the Fed said, will now depend solely on the trajectory of the working market.

The Federal Reserve had previously characterized the spike in inflation as primarily a problem “transient“That would fade as supply bottlenecks caused by the pandemic were resolved.

But the price hike has dragged on longer than the Federal Reserve expected And it has spread from goods like food, energy, and cars to services like apartment rentals, restaurant meals, and hotel rooms. It has weighed heavily on consumers, especially in households with lower income and, in particular, in everyday necessities, and has negated the increase in wages that many workers have received.

In response, the Federal Reserve is diverting its attention from reducing the unemployment, which has rapidly descended to a healthy 4.2%, from the 4.8% from their last meeting, towards the containment of the rise in prices. Consumer prices soared a 6.8% in November compared to a year earlier, the government reported last week, the fastest pace in nearly four decades.

(With information from AP and Reuters)

Keep reading:

Investors Bet Powell and Fed Will Be More Aggressive on Inflation

Source link

HELEN HERNANDEZ

Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Helen@oicanadian.com Phone : +1 281-333-2229

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker