December decisions
At the mid-December meeting, the Central Bank reduced the pace of its accelerated monetary policy tightening, deciding on the seventh consecutive interest rate hike, but by 50 basis points instead of 75 as in the previous four meetings. Rates are now in the range of 4.25%-4.50%. However, he also underlined, in his statement and in the press conference of chairman Jerome Powell, the intention to continue in the squeeze in the first months of this year, with perhaps cumulative interventions for another 75 basis points, to bring inflation under control and towards the ideal target of 2 per cent.
The trend of inflation
The rise in consumer prices, after peaking over 9% last summer, the highest in 40 years, slowed down to 7.1% in November compared to the previous year, but remains well above the Fed’s targets. At stake is also the more general state of the economy, the ability or otherwise of the Fed to facilitate a soft landing, a soft landing that avoids severe recessions. The minutes from the latest meeting show that the Fed sees the labor market as still robust. Economic activity, for its part, should advance albeit at a markedly weakened pace. The Atlanta Central Bank headquarters, with its constantly updated GDP indicator, calculates that in the last quarter, the fourth of 2022, annual growth may still have been 3.9 percent. But at least a significant slowdown in expansion is on the cards in the new year, according to analysts. Moody’s, in the outlook of chief economist Mark Zandi, anticipates what it calls a “slowcession”, a protracted weakness that sees GDP at a rate of less than 1% in the four quarters of 2023.
