The US Fed raises interest rates by 25 basis points and promises further increases

First modification: 02/02/2023 – 03:54

The Federal Reserve raised its benchmark interest rate by a quarter of a percentage point, while continuing to promise “continued increases” in borrowing costs as part of its unresolved battle against inflation.

“Inflation has eased a bit, but it remains elevated,” the US central bank said in a statement that marked explicit acknowledgment of the progress made in slowing the pace of price increases from 40-year highs reached last year. past.

Russia’s war in Ukraine, for example, is a key driver of “elevated global uncertainty,” the Fed said. But policymakers left behind the language of earlier statements citing war and the pandemic as direct contributors to rising prices. prices and omitted mention of the global health crisis for the first time since March 2020.

The Fed said the US economy was enjoying “modest growth” and “robust” job gains, with policymakers still “very vigilant about inflation risks.”

“The (Federal Open Market) Committee anticipates that continued increases in the target range will be appropriate to achieve a monetary policy stance that is tight enough to return inflation to 2% over time,” the Fed said.

“If they were expecting clear signs of a forthcoming pause in interest rate hikes, they were left with it. The Federal Reserve kept the phrase ‘continued hikes’ in its statement, leaving their options open depending on what the next data says. economics,” reacted Greg McBride, Bankrate’s chief financial analyst.

“While recent developments are encouraging, we will need a lot more evidence to be sure that inflation remains low,” Powell told a news conference. The official anticipated that “continuous increases will be appropriate” to achieve a “restrictive enough” monetary policy to bring inflation down to 2%.

“We have covered a lot of ground and the full effects of our rapid tightening have not yet been felt so far. We have more work to do,” he insisted.

US job offers hit their highest level in five months

Job openings rose unexpectedly in December, highlighting the disparity in the US job market, despite rising interest rates and growing fears of a recession.

There were 1.9 job openings for every jobless person in December, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey.

But signs of persistent labor shortages did not deter the US central bank, which raised its policy rate by 25 basis points at the end of a two-day meeting, further slowing the pace of Fed rate hikes. .

According to Christopher Rupkey, chief economist at FWDBONDS in New York, “this could be the first recession in history without significant job losses.” “It’s good for the Fed that inflationary pressures are cooling off because the labor market is not cooling down at all,” he added.

Job postings increased by 572,000 to a five-month high of 11.0 million in December.

with Reuters