The American regulator has been forced to force interest rate growth against the background of a record inflation for 40 years.
The US Federal Reserve System (FRS) raised the base rate by 50 basis points. Now its range is 0.75-1% per year, according to the communiqué of the Federal Open Market Committee (FOMC) following its meeting on Wednesday, May 4th.
This is the most serious monetary policy restriction by the US regulator since 2000. But this decision coincides with the forecasts of economists and market participants.
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The Fed said in a statement that despite the slowdown in overall economic activity in the first quarter, household spending and fixed investment remained stable and employment rising. At the same time, the Fed cited the rising inflation rate due to the imbalance in supply and demand “associated with pandemics and high energy prices.”
Speaking about the events in Ukraine, the Fed said that their consequences for the US economy were “very uncertain”, but allowed that these events would have an upward impact on inflation and reduce the activity of business.
In conjunction with the rate increase, the U.S. regulator announced that starting June 1, it will begin selling mortgages and treasury bonds from the balance sheet – at $ 17.5 billion and $ 30 billion per month, respectively. In three months, the sale is planned to accelerate to $ 35 billion and $ 60 billion per month. This means a reduction in the Fed’s balance sheet of approximately $ 1 trillion a year.
The Fed needs to be forced to tighten monetary policy against the backdrop of high inflation. In March, it rose to 8.5%, the highest since 1982.
Earlier, US President Joe Biden said the war in Ukraine had led to rising prices. Russia’s aggression raises the price of gas and food around the world.
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Source: korrespondent
