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Fed ready to raise rates to cool US inflation

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As expected, the Fed announced this evening that, with inflation above the target threshold of 2% and with a very strong labor market, it will be appropriate raise the level of interest rates in the US soonnow still stuck in the 0-0.25 percent range.

In its statement, the Fed also confirmed that it will continue to reduce the monthly pace of net purchases of government bonds and real estate, completing them in early March.

Fed, by how much interest rates will be raised

According to consensus expectations, US interest rates will be raised for at least 4 times in the course of 2022 starting from March to counter the flare-up of inflation which in December reached 7% on an annual basis, at levels not seen since 1982.

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In recent days the president Jerome Powelltried to reassure US senators that the central bank will be able to curb price increases without hurting the US economy.

Reassurances that were not enough for the director of the International Monetary Fund, Kristalina Georgieva, who warned that the increase in interest rates by the Fed could “cool” the already weak economic recovery of some countries.

For Georgieva, it is “extremely important” that the Fed clearly communicates its monetary policy plans to avoid surprises. To the list of concerns, we must add the price of oil, which today exceeded $ 90, on its highest level since 2014.

Anthilia Sgr analysts pointed out that the Powell’s press conference added some ideas not really appreciated by the market, including the fact that the first hike should take place in March, that a hike at each meeting is not a circumstance to be excluded because there is a lot of space, and we cannot give many details on the budget reduction, but it will probably go faster than in the past.

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After the announcement of the US central bank, the Wal Street stock indices they accentuated the decline, yielding more than half a percentage point.
Since the beginning of the year, the main US indices have lost more than 10%, penalized by the decline in technology stocks, the most affected by an increase in interest rates.

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