(Washington) The second phase of the fight against inflation is launched in the United States, where the central bank, after having raised rates very sharply since the spring, is now slowing down the pace and has drastically reduced its growth forecasts for 2023 .
The US central bank (Fed) raised its main interest rate by half a percentage point on Wednesday. This is now in a range of 4.25 to 4.50%, the Fed announced in a press release issued after its meeting, saying the decision was unanimous.
This is the highest level since 2007. And the Fed has warned that it is not yet the time to stop: further hikes “will be appropriate”, specifies the institute.
Its officials even expect it to rise above 5.00%, while they had anticipated 4.6% in their previous forecast, released in September.
Because, if the rise in prices has shown a “welcome slowdown”, Fed Chairman Jerome Powell underlined during a press conference following this meeting, he estimates that “much more evidence will be needed to be sure that inflation is really on a slowing trend.
This lower-than-previous rate hike marks the beginning of a new phase in the fight against inflation, a priority of the Fed.
Facing a price hike, the highest in more than 40 years, the Fed has brought out the heavy artillery since the start of the year, raising rates by three-quarters of a point on four occasions, a level of hike it had not used since 1994. But the effects of his decisions take months to be felt.
Slow decline
The Fed, however, is a little less optimistic than in September on the trajectory of inflation, which now sees it slowing to just 3.1% in 2023, while previously counting on 2.8%, according to the PCE index which favors and wants to bring back about 2%.
For 2022 it expects 5.6%, against 5.4% three months ago.
It has also drastically reduced its growth forecast for 2023, now counting on 0.5% against 1.2% previously. However, this year it has raised it a bit, even to 0.5%, versus 0.2% previously.
The institute does not speak of a recession for next year, despite the risks caused by its fight against inflation, which could slow down economic activity too much.
“I don’t think anyone knows whether or not there will be a recession” in the United States, said Jerome Powell.
The Fed’s key rate was, until March, between 0 and 0.25%, a minimum level intended to support the economy during the COVID-19 crisis by stimulating consumption.
It had also been driven by the particularly high level of American savings, just as many goods were becoming more difficult to obtain due to global supply constraints and labor shortages. Prices had skyrocketed as a result.
“Structural labor shortage”
If the decline has started, it remains slow.
Inflation slowed sharply in November, to 7.1% from 7.7% in October, according to the CPI.
As for the unemployment rate, currently at 3.7%, the Fed sees it rise to 4.6% in 2023 and 2024, just above the 4.4% it had previously forecast, which “remains very solid,” he commented. further the Fed chairman.
Employers are still expected to struggle to hire in the near future, because the country is facing a “structural labor shortage”, with “4 million people missing”, due, he explained, to early retirements, the million and a half deaths from COVID-19, and insufficient immigration.
This forces companies to raise salaries to attract candidates and retain staff.
“I don’t think we’re in a price-wage spiral,” Treasury Secretary Janet Yellen told reporters last week.
Even the European Central Bank (ECB), which will meet on Thursday, could move on to the second phase of the fight against inflation, and slow down, after having implemented a monetary tightening since July, unprecedented in its history.
