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Tuesday, September 27, 2022

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Fed raises interest rates by 0.75 points, the largest increase in 28 years

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The United States Federal Reserve (Fed) announced on Wednesday a rise in the official interest rate of 0.75 points, the largest increase in 28 years, to fight runaway inflation.

With this increase -which is the third since the Fed began to raise rates in March-, the official interest rate of the largest economy in the world is placed in a range between 1.5% and 1.75%.

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In an official statement at the end of their two-day meeting, the Board of Governors of the Federal Reserve system also announced that it expects to carry out more rate hikes in the future.

This is the largest rate hike since 1994, when Democrat Bill Clinton was in charge of the White House and the Fed was led by the historic Alan Greenspan.

On the other hand, the Fed announced that it will continue to reduce its public debt portfolio of the US Government, mainly made up of Treasury bills and securities backed by mortgage loans.

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Currently, the central bank accumulates about $9 billion in US debt.

As it did in June, the Fed will unload $30 billion in Treasury bills and $17.5 billion in mortgage-backed securities each month in July and August.

Starting in September, these monthly figures will rise to US$60 billion and US$35 billion respectively, and the process will end when levels considered “slightly above” what the bank considers “ample reserves” are reached.

The committee is strongly committed to the goal of bringing inflation back to 2%”, indicated the US central bank.

Last Friday it became known that inflation in the United States shot up in May to its highest rate in the last 40 years, 8.6%, a new escalation in consumer prices driven above all by the sharp increase in energy prices.

Just one day later, on Saturday, the price of a gallon of gasoline (3.78 liters) at gas stations in the United States reached US$5, a figure never before recorded.

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Source: Gestion

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