The Fed decreed a new increase in interest rates

The Federal Reserve of the United States (FED) decreed a new increase in reference interest rates in the order of 0.5 percentage points to place them in a range that oscillates between 0.75 % and 1 % with the purpose of avoiding a increase in inflation.

The information was provided through an official statement from the institution where they indicated that “Inflation remains high, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures”.

This increase is the third that the FED has made since March, after inflation registered an unexpected increase last month and warned that other increases may come. Not since 1994 has a rise in interest rates of this magnitude been recorded.

Control of employment and long-term inflation

The FED projected a slowdown in the economy and a rise in unemployment in the coming months, which is why it plans to “achieve maximum employment and inflation at a rate of 2 percent in the long term, because they have decided to raise the target range for the federal funds rate of 1-1/2 to 1-3/4 percent and anticipates that continued increases in the target range will be appropriate.”

On the other hand, the Committee will reduce its trends “for Treasury securities and agency debt and agency mortgage-backed securities” in accordance with the provisions of the Plans to reduce the size of the Federal Reserve balance sheet, published last month of May.

The institution indicated that it would be prepared to adjust the monetary policy if factors occur that impede the control of inflation. Forecasts indicate that interest rates will reach 3.4% by the end of the year, a movement that affects citizens in aspects such as higher borrowing costs for credit cards or mortgages.

M. Rodríguez

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Source: finanzasdigital.com