- The Federal Reserve of the United States announced that it will increase its federal interest rates again by 75 percentage points
The United States Federal Reserve (Fed) announced this Wednesday that it will increase its federal rates by 75 points. It is the third time in the year that it approves a rise, as a new attempt to curb the high inflation that still invades the country.
Fed chief Jerome Powell had warned as early as last month that interest rate hikes to combat inflation would “cause some pain.” The new increase was announced this Wednesday at a press conference.
Despite the previous increases, this will not be the last that the Fed would carry out, since it is even expected that rates will increase at the end of 2022 much more than what was predicted three months ago and that, probably, they will remain high for a longer period of time.
The forecasts on the action of the Fed had been given last week and pointed to a rise in interest rates of 75 percentage points. Although this is a measure to attack inflation, several renowned economists and experts have pointed out that having high interest rates would cause the United States to fall into an economic recession in the following months, since it would increase the cost of mortgages, loans to buy vehicles and business credits.
However, for the central bank it is important to cool down the US labor market a bit in order to put a limit on wage increases and thus on the inflationary pressures that surround the country’s residents. At the same time, this decision increases the risk that the economy will weaken and that some people will lose their jobs. In fact, as an anticipatory measure, some companies have already been cutting some of their staff.
Not since 2008 has the US economy faced such high interest rates. In that year there was a financial crisis in the country.
Year-on-year inflation during the month of August was 8.3%, during the month of July it was 8.5% and during the month of June it was 9.1%. Although it fell from June to August, this percentage was not considerable, at least it did not reflect what was expected, therefore, the Fed has had to act again.
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