This is an increase never seen “since 1994”recalls the Wall Street Journal. Determined to fight against inflation (+ 8.6% in May), the American central bank (Fed) raised its key rates by three quarters of points on Wednesday. This increase “is unusually large”admitted Fed Chairman Jerome Powell at a press conference.
“Twelve days ago, before the period of discretion imposed by the members of the Fed’s monetary policy committee, it was only a question of raising rates by 0.5 percentage points”note The evening. If the Fed finally decided to “bring out the heavy artillery”it is due to “worse-than-expected inflation numbers and consumer surveys indicating that Americans expected inflation to remain high over the long term”analyzes the Belgian daily.
Fears of another recession
This “decision will make home loans more expensive […] and a wide range of commercial investments”note it Washington Post recalling that this increase aims to “calm an overheated economy”. The Fed is looking to “rein in consumer spending, so that demand for goods and services falls, which should help lower prices”, explains the American daily. But investors and some companies fear that this desire to control inflation “cool the economy too much, triggering a new recession and a wave of layoffs”.
Jerome Powell a “very clearly indicated that an equally outsized rate hike should be expected at the next meeting [de la banque centrale américaine] in July, unless price increases subside”notice the Guardian. “Looking ahead today, a 50bps or 75bps hike looks very likely”said the chairman of the Fed.
“The big question now is whether the Fed can raise rates at a faster pace than it previously expected and bring inflation down, without pushing the economy into an outright recession”note it New Yorker. According to a survey conducted by the Financial Times and the University of Chicago, released Sunday, “more than two-thirds of academic economists think Powell won’t make it: they predict a recession will start next year”recalls the magazine.
But economists’ forecasts “are generally no better than the Fed’s, and Powell insists that all is not lost”notice the New Yorker. Asked about a new report “Indicating that retail sales had slipped slightly last month, he said overall spending remained strong and there was no sign yet of a broader slowdown in the economy.”