Fed ready to raise rates ‘more aggressively’ if needed

The Fed raised its key rates on Wednesday, for the first time since 2018, in order to combat high inflation.

The American central bank is ready to accelerate the rise in its rates in 2022, and to raise them by more than a quarter of a percentage point on one or more occasions if necessary, assured its president Jerome Powell on Monday.

If we conclude that it is appropriate to act more aggressively by raising policy rates by more than 25 basis points at a meeting or meetings, we will do so.said Jerome Powell at the annual conference of the National Association for Business Economics (NABE).

The Fed raised its key rates on Wednesday, for the first time since 2018, in order to combat high inflation. She opted for a moderate first hike of a quarter of a percentage point, not half a point straight, which would have been an unusually quick move.

Prices that keep rising

The key rates, which since March 2020 have been in a range of 0 to 0.25%, are therefore now between 0.25 and 0.50%. And several new increases are to be expected in 2022, perhaps even one at each meeting. The majority of monetary committee officials see rates settling at around 1.75% at the end of 2022.

More “if we determine that we need to tighten beyond” of the measure considered as neutral of 2 or 2.5%, “we will do it too“, underlined the president of the powerful federal reserve.

The prices, in fact, keep climbing. On Wednesday, the Fed’s Monetary Committee also updated its economic outlook, and revised its inflation forecast sharply up to 4.3%, twice what was expected in December.
The outlook for inflation had deteriorated significantly this year even before Russia’s invasion of Ukraine“, still noted Jérôme Powell.

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