U.S. Federal Reserve raises rates 0.25% higher to 2007 levels

In a scenario of absolute uncertainty due to the banking situation in the United States, the Federal Reserve continues on its path to curb inflation. This Wednesday, Jerome Powell, chairman of the Federal Reserve, announced the tenth consecutive hike of interest rates, which are in the range of between 5% and 5.25%.. Thus, they are already at 2007 levels.

Unlike the last 25 basis point hike announced on March 22, this time the Fed has not mentioned that they are needed further rate hikes interest rates to curb the rise in prices and bring inflation back to the 2% target. In this way, we could be faced with a possible pause in the climbs.

However, in determining the hike, account will be taken of the progressive tightening of monetary policy, of the “lagged effects” of monetary policy on economic activity, inflation and the financial sector. In addition, the Fed assures that “is prepared” to “tighten” its monetary policy. if “risks emerge that would impede the achievement of the Committee’s objectives.”

On the other hand, unchanged are the balance sheet reduction plans of the Fed, reinvesting maturing debt principal except for $95 billion (€85.817 billion) each month, between Treasury bonds and mortgage securities.

GDP, unemployment and inflation

The economy of the world’s leading power experienced a annualized growth of 5.1%. of its GDP in the first quarter of 2023 versus 6.6% in the last tranche of 2022, according to the Bureau of Economic Analysis (BEA).

As for the U.S. market, this created 236,000 jobs during last March, bringing unemployment down one-tenth to 3.5%, according to the Labor Department’s Bureau of Labor Statistics.

Thus, U.S. U.S. unemployment remains near the minimum unemployment rate recorded in January, when it reached 3.4%, its lowest rate since 1969.

On its side, the personal consumption expenditures price index, the Fed’s preferred variable for monitoring inflation, came in at 4.2% year-on-year in March, nine tenths of a percentage point lower from the previous month. The monthly rate registered an expansion of 0.1%, two tenths of a percentage point less.

The underlying variable, which excludes energy and food prices from its calculation due to their greater volatility, closed at 4.6%, a tenth of a percentage point lower.