- Natalie Sherman
- New York – BBC
Federal Reserve Chairman Jerome Powell
The US central bank raised interest rates again and warned that further hikes would be needed to curb the pace of rapid price increases.
And forecasts from the Federal Reserve showed that the bank’s main interest rate could exceed 5% annually from now.
But lawmakers have started to tread more caution, after signs that the country’s biggest inflation in decades is starting to ease.
They agreed to raise the bank’s key interest rate by half a percentage point.
This pushed the Fed’s key interest rate target range from 4.25% to 4.5%, the highest rate in 15 years.
However, this increase was less than recently announced.
Fed Chairman Jerome Powell said the bank wants to slow down to see how the economy responds to the cumulative impact of the hikes, which have made mortgages, auto and commercial loans more expensive and credit card debt more expensive. costly.
But he warned that Wednesday’s increase “is still a historically significant increase and we still have a long way to go.”
The world is watching the US central bank’s moves closely, as the US is leading a global shift towards rising borrowing costs after years of low interest rates following the financial crisis.
The UAE and Saudi Arabia were among the countries that increased borrowing costs on Wednesday, blaming the Federal Reserve’s rate hike decision.
The Bank of England, which has warned the country is facing its longest-ever recession, is expected to announce a hike of half a percentage point on Thursday, after approving an even larger hike last month. The European Central Bank is preparing to take a similar step.
Is inflation improving?
The hike, announced Wednesday, is the Fed’s seventh this year.
The bank is responding to US inflation, which remains close to its highest level in 40 years, though it has declined since peaking at 9.1 percent in June, buoyed by lower energy costs.
The latest US data showed that consumer prices fell 7.1% in the 12 months ending in November, compared with October prices of 7.7%.
Powell said the bank had been motivated by indications of improving inflation, but that it would take “a lot more evidence” to be sure it was on a sustainable downward trajectory.
added : “It’s good to see progress, but we still have a long way to go to get back to price stability.”
By increasing borrowing costs, the Fed hopes to cool economic activity and ease upward pressures.
