Federal Reserve Bank of the USA
| Gal Rekover, Devar News
The US central bank decided today (Wednesday) to raise the interest rate by 50 basis points to 4.5%. The Federal Reserve did reduce the rate of increases, but this is the highest interest rate in the last 15 years.
In the background to the decision, the first signs of slowing inflation in the US. Yesterday, the US Department of Labor announced that annual inflation had dropped to 7.1%, a faster decline than expected.
In its last four interest rate decisions, the US Federal Reserve raised interest rates by 75 basis points.
The Federal Reserve began raising interest rates following the increase in the US. This, based on the concept that economic activity in the country should be slowed down in order to reduce the demand for products, which should lead to an end to price increases.
On the other hand, a number of senior economists call for a moderate approach, i.e. delaying interest rate increases. According to these economists, including Nobel Prize winner Joseph Stieglitz, former Federal Reserve economist Claudia Sahm, and Dean Baker, founder of the Washington Institute for Economic and Policy Research, the source of inflation is not in the labor market. In addition to that, they claim that the economic damage of the interest rate hikes is severe and that the labor market is weaker than it seems.
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