Prescription of ‘super precipitation’ for inflation… 0.25→0.5→0.75%p ultra-speed rate hike
“Year-end interest rate forecast of 3.4%… Growth rate lowered to 1.7% and inflation raised to 5.2%”
The United States, which is suffering from the worst inflation since the end of 1981 due to sharply soaring prices, made a super strong push to raise interest rates sharply to catch inflation.
The Federal Reserve (Fed), the central bank of the United States, announced that it would raise its key interest rate by 0.75 percentage points after the regular meeting of the Federal Open Market Committee (FOMC) on the 15th (local time).
As a result, the US benchmark interest rate has risen sharply from the previous 0.75-1.00% level to the 1.50-1.75% level.
It is the first time in 28 years since 1994 that the Fed has taken the “giant step” of raising rates by 0.75 percentage points.
Earlier in March, the Fed raised interest rates by 0.25 percentage points for the first time in three years to catch inflation, which has been soaring since the COVID-19 pandemic, ending the era of zero interest rates. A 0.5 percentage point (big step) rate hike was carried out.
Federal Reserve Chairman Jerome Powell said last month that he would consider an interest rate hike by 0.5 percentage points in June and July while drawing a line on the possibility of a 0.75 percentage point rate hike right after the big step.
However, as the record price rise did not subside and the ‘inflation peak theory’ was shaken, the Fed showed a resolute will to stabilize inflation by raising interest rates by 0.75 percentage points.
The US Consumer Price Index (CPI) for May, announced on the 10th, rose 8.6% from the same period last year, the steepest in 40 years and 5 months since December 1981.
When the CPI exceeded its forecast in May, the market, which had originally expected the Fed to raise the key interest rate by 0.5 percentage points, also released revised forecasts that the Fed would raise it by 0.75 percentage points.
Looking at the dot plot, which is an indicator of the future interest rate prospects of the FOMC members, they predicted the interest rate level at the end of this year to be 3.4%.
This is an increase of 1.5 percentage points from the previous month.
The Fed also downgraded its forecast for U.S. economic growth this year to 1.7%, 1.1 percentage points lower than the 2.8% it released in March, and raised its inflation forecast for this year to 5.2% from 4.3%.
In announcing the size of the rate hike on the same day, the Fed said it expects a continued increase in the target range for interest rates to be appropriate.
/yunhap news
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