The Federal Reserve raised interest rates in the US
| Gal Rekover, Devar News
The Federal Reserve, the American central bank, approved on Wednesday evening, for the fourth time in a row, an increase of 75 basis points in the rate. Thus, the interest rate for short-term loans in the US reaches 4.00%-3.75%, the highest rate since before the global financial crisis in 2008.
According to forecasts, the Fed’s next hikes will be less large considering the global economic slowdown. A hint in this direction came in the bank’s statement, in which it was said that they would take into account the effects of the cumulative monetary reduction on economic and financial developments.
The Federal Reserve’s hawkish interest rate is drawing criticism in light of the decline in economic activity. At the beginning of October, the head of the international, Kristalina Georgieva, said that a third of the economies will suffer a reduction in at least two quarters in 2023.
The American economy froze in the first two quarters of 2022 and enjoyed 2.6% growth in the third quarter. However, the growth in was helped a lot by volatile components such as exports and inventory.
Economist Dean Baker, who became famous as one of the few economists who predicted the economic crisis in 2008, said before the interest rate decision in the US that the slowdown in the increase means that the central bank has achieved its goal, and that it should stop raising interest rates. Baker pointed out that the increase in the number of jobs is also small, And in general, the American labor market is in a good and stable condition.
The increase in interest rates in the US also creates environmental damage, as it attracts capital from developing countries and leads to the strengthening of the American economy. To combat capital flight, the developing countries are also forced to raise interest rates – thus damaging the level of local demand.
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