The US Federal Reserve has raised interest rates by 25 basis points as expected. The Fed has announced that additional rate hikes are imminent.
The Federal Reserve is taking its foot off the accelerator. After four interest rate hikes of 75 basis points each and one of 50 basis points in barely six months, only an extra 25 basis points was chosen. As a result, the various policy interest rates amount to 4.5 to 4.75 percent. According to the Fed statement, rate hikes are still on the horizon. However, she did not specify how large they would be. That would mainly come from the macroeconomic figures.
• On Super Thursday, interest rates go up everywhere
For Fed Chairman Jerome Powell, it remains a difficult balancing act. On the one hand, inflation in the US – as in Europe – is clearly cooling down. In December inflation fell to 5 percent, down from 5.5 percent in November. Core inflation, excluding food and energy, also fell from 4.7 to 4.4 percent. Yet these are levels well above the target of 2 percent. The Fed reiterated in its accompanying statement that it is very committed to bringing inflation down to 2 percent.
• Stock market concerns are on the rise
There is also not much evidence of a clear cooling of the US economy. The job growth of 185,000 new jobs in December indicates that the labor market is still strong, despite the announcement of major layoffs in the IT sector. Still, there are signs that the US labor market is weakening somewhat, such as a fall in the number of temporary workers – an early indicator of an economic slowdown – and more people forced to work part-time.
