London Daily

Focus on the big picture.

US central bank slows pace of rate hikes again but warns of more action ahead

US central bank slows pace of rate hikes again but warns of more action ahead

The Federal Reserve says it remains concerned about inflationary pressures in sectors of the US economy, signalling further rate hikes are likely in the months ahead.

The US central bank has slowed the pace of interest rate hikes further but indicated more rises are likely despite official figures suggesting price pressures have peaked in the world's largest economy.

The Federal Reserve revealed its verdict hours before counterparts in the UK and Europe made their next moves in the battle against inflation - with both the Bank of England and European Central Bank set to raise borrowing costs further.

The Fed, as it's known, raised its target interest rate by a quarter of a percentage point - as financial markets expected - following an aggressive set of increases last year to tame decades-high inflation.

It was lifted to a range between 4.50% to 4.75%.

The statement from the Fed confirmed that policymakers planned to maintain an iron grip on inflation risks through further hikes.

"The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," it read.

Fed chairman Jay Powell later told a news conference that history told him it would be dangerous to take the foot off the gas "prematurely".

His language was seen as hawkish in the face of the smallest rise in the target rate since last March though markets, which were initially spooked, took some comfort when Mr Powell confirmed its next moves would be determined by the data.

He also confirmed Fed expectations that the US economy would grow this year.

March 2022 was when the Fed made its first move against surging US inflation as post-pandemic price rises were exacerbated around the world by the war in Ukraine.

The Fed had imposed four consecutive hikes of 0.75 percentage points prior to its last meeting in December, when the pace was reduced to a half percentage point rise.

It was at that point, before Christmas, when inflationary pressures were truly seen by policymakers as easing from the four-decade highs seen earlier in 2022 because so-called core inflation had slowed.

Global wheat costs were among those to surge after Russia's invasion of Ukraine

The cost of things such as oil, gas and many other commodities - outside of central bank control - went through the roof.

These increases later became ingrained in prices across Western economies as costs were passed down supply chains, pressuring central banks to cool economic activity and discourage wage increases that could inflame the inflation problem.

While economists believe inflation has also peaked in the UK and across Europe, the continent's exposure to the loss of Russian energy flows has inflation more stubborn.

The Bank of England's next rate decision is revealed at midday on Thursday


The Bank of England is widely expected to lift its rate from 3.5% to 4% on Thursday as a result.

The European Central Bank, which sets the rate path for the 20 countries which use the euro, is expected to impose the same hike in its main deposit rate.

The pound and euro both lost around a third of a cent as the dollar strengthened in the immediate aftermath of the Fed's decision but both later recovered.

Oil prices, however, were down by 3% as the prospect of more rate tightening was seen as damaging for demand. Brent crude was trading at $83 a barrel.

Richard Carter, head of fixed interest research at Quilter Cheviot, said of the quarter point rate rise: "Investors should not confuse this as the end of the rate hiking cycle, instead a pause for breath as the Federal Reserve looks to continue to fight inflation, while also assessing if further hikes are the way to go.

"The economy has been fairly resilient and the consumer remains in okay shape. Recession could be avoided as a result, but this means we need to prepare for the Fed to continue raising rates for as long as inflation remains elevated.

"The last thing it wants to do is take its foot off the gas too early and stoke a new inflationary cycle," he wrote.


Comments

Oh ya 1 year ago
And under all the BS true inflation is about 14 % if you figure it out like it was in 1980 according to Shadow Stats. But the government keeps changing the rules so it does not look as bad yet we know when we go shopping

Newsletter

Related Articles

London Daily
0:00
0:00
Close
Campaigners Urge UK Government to Block Shein's London IPO
UK Labour Government's Legislative Agenda
UK Labour Government to Regulate Powerful AI Models
Record Heat Temperatures in Ukraine Amid Power Crisis
UK Government Plans to Remove 92 Hereditary Peers from House of Lords
King Charles III Delivers Labour Government's First King's Speech
Officials Remove 'Disastrous' Label from Liz Truss's Mini-Budget
Keir Starmer Outlines Ambitious Plans for Government
Japan to Allocate $3.3 Billion to Ukraine Using Frozen Russian Assets
EU Parliament Condemns Hungarian PM's Russia Visit
FBI Struggles to Find Motive Behind Trump Shooting Incident
Kremlin Criticizes EU Rejection of Orban’s Ukraine Peace Proposal
Google and Microsoft Now Consume More Power Than Several Large Countries
Secret Service Criticized for Lack of Sniper Protection During Trump Shooting
US Senator Robert Menendez Found Guilty of Corruption
Deep Concerns about Political Violence as US Approaches Election Day
Trump Media Shares Surge Following Re-Election Bid Boost
The gunman who attempted to assassinate Donald Trump Saturday is 20-year-old Thomas Matthew Crooks
Banksy's Influence on Port Talbot's Street Art Scene
Bodies of Two Men Found in Suitcases on Bristol Bridge, 24-Year-Old Arrested
Kate Middleton to Attend Wimbledon Men's Final Amid Cancer Recovery
Russia's Electronic Warfare Neutralizes Western Weapons in Ukraine
Trump Challenges Biden to Debate and Golf Match
Macron Accuses Israeli Minister of Election Interference
US Senator Highlights Weaknesses in Western Military Industry During Ukraine Conflict
George Clooney Urges Biden to Withdraw from Presidential Race
Political Shift in the UK: A Detailed Analysis of Labour's Victory and Future Prospects
Viktor Orbán's Peace Mission: A Diplomatic Controversy in the EU
India Advocates Peace and Prosperity: PM Modi's Speech in Austria
New UK PM Keir Starmer Reaffirms Strong Support for Ukraine at NATO Summit
Spain PM Pedro Sanchez Denounces Double Standards on Gaza at NATO Summit
UK Police Arrest Suspect in Crossbow Attack After Three Women Killed
Sunita Williams Safe on ISS, to Address Earth on July 10
Biden Affirms Commitment To Presidential Race
France Faces Political Turmoil and Airport Strikes Ahead of Paris Olympics 2024
Putin Hosts PM Modi for a Private Meeting
TSMC: The Taiwanese Chip Giant Valued Over $1 Trillion
Boeing Pleads Guilty Over 737 MAX Crashes
2024 Predicted to Be World's Hottest Year
Iran's President-Elect Masoud Pezeshkian Reiterates Support for Hezbollah
White House Denies Biden Being Treated for Parkinson's Disease
Biden to Meet New UK Prime Minister Keir Starmer
Biden Insists on Continuing Presidential Race Amid Criticism
UK Defence Minister Pledges Enhanced Support to Ukraine
French Prime Minister Gabriel Attal Resigns After Election Setback
Macron Faces New Political Challenges Despite Election Relief
France's Far-Right Falls Short in Parliamentary Elections
Key Figures in France's Left-Wing New Popular Front Bloc
England Reaches Euro 2024 Semifinals After Penalty Shootout Win
Rishi Sunak Apologizes After Historic Tory Defeat
×