The Limited Times

Now you can see non-English news...

US interest rate decision: Federal Reserve likely to hike rates by 0.25 percent and slow pace


The US Federal Reserve is expected to hike interest rates further tonight. However, since inflation appears to have peaked, Fed Chair Jerome Powell is likely to slow down.

Enlarge image

Market Mower: US Federal Reserve Chairman

Jerome Powell

is likely to hike interest rates to 4.5 to 4.75 percent today

Photo: Seth Little/AP

The US Federal Reserve is likely to slow down its rate hikes again.

On average, economists expect the central bank to raise interest rates by 0.25 percentage points this Wednesday.

The interest margin should thus rise to 4.50 to 4.75 percent.

Evidence is eagerly awaited as to how the Fed will proceed in the further course of the year: Fed Chairman

Jerome Powell

(69) only emphasized in December that there would be further interest rate hikes in 2023 and no interest rate cuts yet.

In December, the central bank last increased the key interest rate by 0.50 points.

Before that, it had made four exceptionally large rate hikes of 0.75 points.

A smaller rate hike is now considered quite likely.

A number of Fed officials had given clear indications, including the Fed chairman himself.

Inflation rate has fallen to 6.5 percent

With its interest rate hikes, the Fed wants to weaken economic momentum in order to bring inflation back to the two percent target.

Commerzbank expert Bernd Weidensteiner sees progress here: "Residential construction, which is particularly sensitive to interest rates, has cooled down significantly, economic sentiment indicators have fallen, and industrial production and retail sales have also weakened recently."

The upward trend in wage growth was also broken in the fourth quarter.

"Wage developments are crucial for the Fed," writes Weidensteiner.

After all, this largely determines the trend in service inflation.

The inflation rate has fallen noticeably in recent months.

In December, the annual rate fell to 6.5 percent.

This was the seventh consecutive decline.

In June, the inflation rate reached a temporary high of 9.1 percent.

With a smaller rate hike, the Fed would raise its key rate less than the ECB for the first time in the current cycle.

The ECB is likely to raise interest rates again this Thursday by 0.50 points.

However, in contrast to the euro zone, the core rate of inflation, which is more meaningful, has recently fallen in the USA.

In the case of the core rate, variables that are susceptible to fluctuations such as energy and food are eliminated.

Interest rate cuts rather unlikely before the end of the year

While it is considered certain that the Fed will only raise interest rates by 0.25 points, the further course of action is open.

Some observers do not rule out that it could have been the last key interest rate hike for the time being.

"In the press conference, Fed boss Powell is likely to try to keep the financial conditions on the capital markets high," write the Commerzbank experts.

"Any statements that point to an earlier cut in key interest rates would counteract this concern."

The economists at the Bayerische Landesbank also expect Powell to remain determined: "The risk of persistent wage dynamics in the current year, which would jeopardize the return to the inflation target, seems too high."


Source: spiegel

All news articles on 2023-02-01

Similar news:

You may like

News/Politics 2022-12-14T20:59:46.250Z
News/Politics 2022-12-14T19:11:33.506Z

Trends 24h

News/Politics 2023-05-28T13:21:28.260Z


© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.