The Federal Reserve increases interest rates by 0.50%: is it a sign that inflation is cooling?

The Federal Reserve increases interest rates by 0.50%: is it a sign that inflation is cooling?

Federal Reserve (Fed) Chairman Jerome Powell announced what would be the last interest rate hike this year by half a percentage point, the smallest of the last four hikes.

This Wednesday, the Federal Reserve (Fed) announced that the last increase in interest rates in the year is half a percentage point (0.50%). Although this increase in reference rates is less than the previous four, central bank officials react favorably to inflation that has subsided in the last two months.

During this 2022, the Fed had an unprecedented year with seven consecutive increases, as part of an aggressive strategy to reduce inflation (the highest in 40 years), despite the fact that many other specialists have pointed out that these measures could lead to a recession in the United States.

In recent days, economists in the country had already predicted an 80% probability that the Fed would again raise interest rates by half a point, less than the last four hikes, which were 0.75%. However, this increase is still double the usual rate for the central bank.

After being at almost 0% at the beginning of the year, interest rates will close the year between 4.25% and 4.5%, contemplating the increase this Wednesday. With this increase, loans and credits could continue to increase in the coming months in the United States.

According to the president of the Fed, Jerome Powell, it is a challenge to continue winning to avoid the increase in prices.

“Ultimately, that question of how much you can raise rates is something we’ll define by looking at the progress of inflation and where the financial conditions are, and after evaluating whether the policy is tight enough,” Powell said Wednesday. at a press conference, following the Fed’s decision.

Even Powell added that both he and central bank officials believe they have not been “restrictive enough” in making interest rate hike decisions, “even after today’s hike.”

“However, we think we’ll get to that point and then the question will be how long we stay there,” Powell said. “And the strong opinion of the committee is that we should stay in that place until we are really sure that inflation is coming down on a sustained basis. And we think that’s going to take some time.”

The Fed conference comes one day after the Bureau of Labor Statistics (BLS) reported that year-on-year inflation for the month of November was 7.1%, which shows a decrease of 0.6% compared to the results obtained in October, which was 7.7%.

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