Sunday, August 14

The US Federal Reserve expects interest rate hikes in 2022

  • Powell admits that escalating inflation is already “widespread” across all sectors and will continue “well into 2022.”

  • The Fed president continues to see the country’s economy “robust” despite lowering the growth forecast by four tenths, to 5.5%

The escalation of the inflation in USA it persists and has caused its first effects. The United States Federal Reserve (Fed) announced this Wednesday that it is increasing the reduction of its bond purchase program in December from 15,000 to 30,000 million dollars and to 60,000 from January, which accelerates the withdrawal of the monetary stimulus, initially planned until June and that will last until March, and at the same time opens the door to a possible rise in interest rates in the first half of 2022. Specifically, the institution estimates in a statement that there will be three increases in the price of money during the first half of next year.

In its note at the end of its two-day meeting, the US central bank left interest rates in the range between 0% and 0.25% unchanged for the moment, despite the fact that inflation stood at an interannual rate of 6.8% in November, the highest figure in almost 40 years in the United States, as is the case in Spain, where it is at the highest level in almost three decades. The president of the Fed, Jerome Powell, in a subsequent press conference, has admitted that inflation in the country is already “generalized” in all sectors, and predicted that it will remain above the institution’s objective of 2% “until well into 2022 “.

With this decision, taken unanimously by the representatives of the US central bank, the volume of monthly bond purchases, which during most of the year pandemic It was 120,000 million dollars, it has already been lowered to 75,000 million. The Federal Reserve attributes its latest decision “to the evolution of inflation and the further improvement in the labor market.” After the measures agreed on Wednesday, Powell said that the forecast now is for the US central bank to completely end its liquidity injection program in mid-March as part of the monetary stimulus initiated in the wake of the crisis caused by the coronavirus.

Less growth, more inflation

He was also optimistic about economic growth in the United States in 2021, which has fallen to 5.5%, four tenths less than in September. Inflation, on the other hand, will be 5.3% instead of the 4.2% previously estimated.

“Economic activity is on track to expand at a robust pace this year, reflecting progress in vaccination and the reopening of the economy,” Powell said. In any case, it has recognized that the rise of the new variant omicron of coronavirus represents a risk to the Recovery.

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He has insisted that “the economy is robust and no longer needs this monetary support,” when answering a journalist’s question about why they wait until March instead of completely ending the bond purchases. In his opinion, the economy does not want sudden blows. Powell also reiterated the idea that interest rate hikes will not occur until the stimulus is fully withdrawn.

Despite initially considering that the rise in the general price level was a transitory phenomenon, forecasts suggest that it is consolidating. In any case, for 2022, however, the central bank estimates that inflation in the US will moderate to 2.6%, four tenths less than it was calculated in September, and predicts that growth will be 4%, two tenths more than planned then.

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