United States: the Fed raises its key rate again but sees the start of disinflation
Fed boss Jerome Powell in Washington on September 21, 2022. © Kevin Lamarque / Reuters
Text by: RFI Follow
2 mins
Unsurprisingly for the markets, the US Central Bank raised its main key rate by 0.25 points on Wednesday February 1, after its first meeting of the year.
This is the eighth increase in a row.
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This increase is less important than the previous ones, but the head of the institution Jerome Powell anticipates others in order to curb inflation, which is still too high in the eyes of the Fed.
"
Recent indicators show moderate growth in spending and output
."
In other words, inflation, which had reached a 40-year high last June, slowed down a little to 5% in December, but it remains high according to the Fed.
The objective of the institution, again recalled Jerome Powell, is indeed to bring inflation down to 2%, but we are still a long way off.
So the rate hike trajectory is maintained at more than a quarter of a point, at 4.75% in order to encourage banks to raise interest rates on loans to households and businesses to limit the rise in prices.
This first meeting of the year marks a return to the more usual quarter-point rhythm.
But further increases are to be expected, the institution warned.
“
We are talking about a few more rate hikes to get to the level that we think is restrictive enough
,” said Jerome Powell during his press conference.
A start of disinflation
Because if the situation improves on the inflation front, it is too early to claim victory.
We are seeing “
the start of disinflation
”, said the Fed Chairman, but “
inflation remains high
”, and the tightening of monetary policy takes time to fully take effect.
Thus, "
although recent developments are encouraging, we will need more evidence to be convinced that inflation is slowing down for a long time
", he insisted.
Another cause for concern is the labor market, which is watched like milk on fire.
For Jerome Powell, there is still too much demand compared to supply, which is driving up wages.
Pending official employment figures at the end of the week, the number of vacancies has increased further in the United States according to data published on Wednesday.
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Economy
United States