The Federal Reserve has done something that seemed unthinkable just a few weeks ago: raise official US interest rates by 0.75 percentage points or, as they say in financial market jargon, 75 basis points.
The decision, which has not surprised experts, is a direct consequence of the dismal CPI data for May, which reached 8.6% year-on-year.
The reasons for the greater than expected tightening of monetary policy are, according to the 'Fed', the confinements in China, which have aggravated the supply chain crisis triggered by Covid-19.
Added to this are the consequences of the invasion of Ukraine to create an inflationary situation that is difficult to control.
Although the danger is not only on the price side.
The economy is slowing down and, in fact, the Federal Reserve has raised its unemployment forecasts.
The last interest rate hike of this amount took place exactly 27 years and 7 months ago: on November 15, 1994. At that time, inflation was 2.6%.
And the increase left official interest rates at 5.5%, that is, 1.9 points above the rise in prices.
Now, on the contrary, and despite the fact that inflation is 8.6%, the rates remain, after this rise, between 1.5% and 1.75%.
Thus, monetary policy is much more lax now than then, although there is a consensus among experts that the economy is much more sensitive to increases in interest rates and, therefore, the upward trend in the price of money is not as great.
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