this fight inflation does not give respite despite fasting slowdown The US economy, the US Federal Reserve (FED) decided this Wednesday raise rates third time in a row 0.75 percent pointsup to range 3-3.25%Its highest level since 2008. more aggressive rise It’s a point some analysts have been waiting for. But despite making the coin three percentage points more expensive so far this year, the dollar’s central bank has made it clear. far upon reaching ceiling from the climbs.
your president, Jerome Powellalready warned about this in his long-awaited speech at the meeting of central bankers. jackson hole (Wyoming) End of August. Then he admitted why this would happen. “a little spicy” repeated a message to homes and businesses. “Higher interest rates, slower growth and a weakened labor market painful for the public But who do we serve? they are not that painful how not to restore price stability“, he argued.
The Federal Reserve thus reduced they significantly reduce GDP forecasts for the world’s leading economy 0.2% this year1.2% and 1.7% next in 2024 (compared to the predicted 1.7%, 1.7% and 1.9% in June). The United States, in fact, has already accumulated two quarters down (0.4% in the first quarter, 0.2% in the second quarter). “A soft landing is a big challenge. No one knows if there will be a recession Or how deep it would be,” Powell admitted.
without ceasefire
Behind all this is a price level. no respite. June was a fateful month with the highest inflation in the country. last 40 years: 9.1%. It was a positive surprise in July. temperate up to 8.5%. But he came back in August. disappoint Down 8.3% and two-tenths above estimates. And more seriously, Core CPI -measuring prices without food and energy- increased to 6.3%four-tenths higher than in July, inflationary pressures they are spreading all over the economy.
The Federal Reserve thus CPI forecasts to 5.4% this year, 2.8% next, and 2.3% in 2024. 2% target in the medium term. Additionally, the underlying will remain above this level at the end of the forecast horizon: 2.1% in 2025This puts pressure on the central bank to keep making money more expensive. this analystsTherefore, they guess that interest rates will close the year with 4.4%it will increase to the next 4.6% and decrease to 3.9% in 2024 and to 2.9% in 2025.
uncertain rise
Powell reminded that these estimates provided by the Fed do not imply what will actually happen. Federal Reserve assured I don’t know how far will increase rates as it will depend on the situation and “sometimes” “It will be convenient slow climbs. But he warned that the market and society must be prepared. “tight” monetary policy for a certain period of time. “History strongly warns early relaxation‘ he argued.
Accordingly, the Federal Reserve’s won’t slow down or stop Rate hikes until we see GDP growth below its potential (1.8% in the long run), the labor market rebalances and wages stop raising, and the trend in the IPC is steadily moving towards the 2% target.
“Inflation remains high, reflecting supply-demand imbalances. Pandemicincrease in prices, food and energyand price pressures wider. Russia’s war against Ukraine causes enormous human and economic hardship. War and related events additional up pressure It weighs heavily on inflation and world economic activity,” he said.
Labor margin
The US monetary authority, in any case, more margin to make its policy tougher than others European Central Bank due to the strength of the labor market. Unlike the ECB, its mandate is not limited to maintaining price stability, but also includes: reach maximum employment possible. Powell average percent of people employed 378,000 people monthly for the last three months.
this unemployment rate country, therefore, at historical minimums of the last 50 years (3.7% in August, two-tenths more than in July) and, as the central banker noted, job offers “significantly” outnumber job seekers. However, the labor market will also suffer effect of rising prices on the economy.
Fed now forecasts unemployment grow to 4.4% 4.6% this year and the next will fall to 3.9% in 2024 and 2.9% in 2025 (compared to 3.4%, 3.8% and 3.4% in June) ). “Restoring price stability is essential for creating the conditions for maximum employment and long-term stable prices. We will stick with it until we are sure the job is done,” Powell said. said.