The Federal Reserve raised interest rates by 75 basis points for the third time in a row

The Federal Reserve on Wednesday raised its benchmark interest rate by 75 basis points for the third time in a row, in an effort to cool decades of high inflation that has driven up the cost of living in the United States. The rally came on expected lines as many economists had anticipated the range, considering the August high inflation number despite earlier moves by the central bank.

The US inflation figure for August came in at 8.3 per cent – this was unexpectedly high as many expected it to fall as the Fed had already raised interest rates in the previous two meetings, 75 basis points each time.

After the rate hike, Federal Reserve Chairman Jerome Powell said he was firmly committed to bringing inflation down to 2 percent. “We have the tool we need and the resolve it takes to restore price stability on behalf of American families and businesses,” he said.

Powell said price stability is the Fed’s responsibility, and that without price stability, the economy is not working for anyone. “In particular, without price stability, we will not achieve a sustainable period of strong labor market conditions that are beneficial to all,” he said.

The Fed’s average rate forecast is now 4.4 percent at the end of this year — one percentage point higher than forecast in June.

Speaking at the Jackson Hole Summit, the Fed chair August 26 said the central bank is intentionally shifting its policy stance to a level that is restrictive enough to bring inflation back to 2 per cent.

Federal Reserve Governor Christopher J. Waller explained earlier this month that inflation is too high and that the central bank will raise the interest rate to bring it back to 2 per cent. Speaking at the 17th Annual Vienna Macroeconomics Workshop in Vienna, Waller said that US inflation has been so high, it is too early to say whether inflation is moving downward purposefully and continuously.

He said the FOMC is committed to taking action to bring inflation down to our 2 percent target. “This is a battle that we cannot and will not abandon,” the governor added.

Waller said fears of a recession that began in the first half of this year have dissipated and a strong US labor market gives the Fed the flexibility to be fierce in its fight against inflation. “For this reason, I support continued increases in the FOMC policy rate and … a significant increase at our next meeting on September 20 and 21 to bring the policy rate to a position that clearly constrains demand,” he said. .

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