Cornered by inflation, the Federal Reserve will accelerate the rate hike

The Federal Reserve decided to swerve in its – until then, silent – fight against inflation by giving signs that it will begin to adjust the economy. After a two-day meeting where the Fed governors meet, the maximum exponent (which had been involved in a sea of ​​criticism for its actions) of the central bank warned that it will raise rates more rapidly than estimated by the market .

Jerome Powell, who is in the eye of the storm for having underestimated the price increase (he called it, a “transitory inflation”), now comes out to put cold cloths for try to stop the rise in prices.

Raising inflation to a rate of nearly 7% this year – the highest in 40 years – not only dented his credibility as a central banker, but also splashed on Joen Biden’s positive image. According to various polls, the Democratic discharge is around 40% and still in a tailspin.

A Dec. 9 survey by NPR / Marist says 61% of Americans believe the country is going in the wrong direction. And 56% say they feel pessimistic that recent government measures can help lower inflation.

A Dec. 9 survey by NPR / Marist says 61% of Americans believe the country is heading in the wrong direction Under that scenario, Powell (endorsed in late November by Biden for another four-year term) reported that It will raise the benchmark rates – currently between zero and 0.25% per year – three times next year.

Under this scenario, Powell (endorsed at the end of November by Biden for another four-year term) announced that he will raise the benchmark rates – currently between zero and 0.25% per year – three times next year.

It slipped that it will increase three-quarters of a point (that is, 0.75%) during 2022, there will be another similar rise in 2023 and it will increase two times more in 2024. In this way, the control rate that will govern the economy after these increases it will be 2.1% at the end of the period.

In addition, it will terminate the repurchase of corporate debt in the market (through which it injected dollars to stimulate the economy) already in March of next year, when it was previously thought that this policy would last at least until mid-2022.

President Joe Biden.

In addition, it will terminate the repurchase of corporate debt in the market (through which it injected dollars to stimulate the economy) already in March of next year, when it was previously thought that this policy would last at least until mid-2022.

In the post-conclave Fed statement, officials removed a pre-inflation reference that reflects factors that were “expected to be transitory.” Powell told lawmakers last month it was time to “withdraw” the Fed’s description of high inflation as “transitory,” a stance he held for most of 2021.

Powell was criticized by both Republican and Democratic referents. So much so that the Democratic economist and Nobel laureate, Joseph Stiglitz, asked that Biden not renew his mandate.

“Reading the Fed statement and its careful way in which it avoided the ‘T’ word, I wonder if any linguistic help would be necessary. Perhaps from now on referring to inflation as ‘fleeting’?” He commented wryly Nobel laureate in economics and fervent defender of the Democrats, Paul Krugman.

Comments like these are not isolated. Powell was criticized by both Republican and Democratic referents. So much so that the Democratic economist and Nobel laureate, Joseph Stiglitz, asked that Biden not renew his mandate.

Europe has the highest inflation in the last three decades due to the historical rise in energy

The “fight” against inflation comes at a time when consumer prices rose 6.8% in the year to November, marking the fastest pace since 1982. In recent months, the rise in prices of Food and energy and accelerating rental inflation have contributed more to headline inflation than at the beginning of the year, when huge price increases were concentrated mainly in the used car market and the reopening of the leisure sector and the post Covid hospitality industry.

The Fed’s inflation projection for 2022 was revised to 2.6%, from 2.2% in September. And now it projects that the unemployment rate – key to raising rates or not – by the end of next year will be 3.5%, compared to 3.8% in September. Biden still has three more seats available to fill on the central bank’s Board of Governors in Washington and is expected to announce his elections in the coming days.

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Cornered by inflation, the Federal Reserve will accelerate the rate hike