Washington In view of the high inflation in the USA, the Fed is showing broad support for further large rate hikes in the summer. As can be seen from the minutes of the monetary policy meeting on May 4th, which were published on Wednesday, all monetary watchdogs backed the half a percentage point increase that had been decided upon. According to the transcripts, most participants were also of the opinion that further steps of this size would be “probably appropriate” at the meetings in June and July.
After the largest jump in interest rates in 22 years, the monetary policy level is now in a range of 0.75 to 1.00 percent. At the meeting, monetary authorities agreed that the economy was very strong and the labor market was extremely tight. In addition, inflation was assessed as high, with the risks of an acceleration in inflation even “pointing to the upside”. Global supply chain problems, the Ukraine war and the corona lockdowns in China were seen as possible drivers.
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The Fed is faced with an inflation rate of 8.3 percent most recently. According to Fed Chair Jerome Powell, she intends to tighten the reins until inflation is under control. There must be “clear and compelling” signs that inflation is slowing down, he said recently. If that doesn’t happen, the Fed will have to consider a more aggressive approach.
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However, what speaks against an even higher rate of tightening of monetary policy is that the US economy surprisingly went into decline at the beginning of the year and the home business has also recently collapsed: “The latest economic data, which is anything but robust, is fueling speculation that the Fed might be raising interest rates not have to raise it as aggressively as originally thought,” says analyst Raffi Boyadjian of brokerage house XM.
More: Fed Chair Powell is not ruling out more aggressive action to keep inflation down