This is the third increase in a row in these rates, which are now in a range between 1.50 and 1.75% and set the tone for loans granted to individuals and businesses.
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Faced with the rise in prices, the American Central Bank (Fed) raised, on Wednesday June 15, its key rates by three quarters of a point. This increase, the strongest since 1994, “is unusually large”, underlined the boss of the institution, Jerome Powell. This is the third increase in a row in these rates, which are now in a range between 1.50 and 1.75% and set the tone for loans granted to individuals and businesses.
We can expect further increases of the same order in the months to come. “Looking ahead to today, a 50bps or 75bps increase looks very likely at our next meeting”, at the end of July, he added. Because bringing the rise in prices back to around 2% is the priority. Most of the institution’s officials therefore see the rates rising, by the end of the year, to the range of 3.25 to 3.50%.
The Fed has also revised its inflation projections upwards, now expecting 5.2% in 2022 and 2.6% in 2023. The rise in prices remains “high, reflecting pandemic-related supply and demand imbalances, higher energy prices and broader pricing pressures”underlined the institution.
She recalls that the Russian invasion of Ukraine and the sanctions against Russia have created “additional upward pressure on inflation and weighing on global economic activity”. Consequently, the Fed expects economic growth to be weaker than expected this year in the United States, at 1.7%, against 2.8% previously.