Fed expresses urgency for raising rates in inflation fight

May 25, 2022 02:18 PM PDT | By Sanjeeb Baruah
 Fed expresses urgency for raising rates in inflation fight
Image source: © Sparky2000 | Megapixl.com

Highlights

  • The Fed raised the rates by half a point in May, following a 25-basis point increase in March.
  • The US Consumer Price Index, excluding food and energy, rose at a seasonally adjusted 0.6% in April and climbed 6.2% over the last 12 months.
  • The Federal Reserve hasn’t raised the interest rates for two consecutive months since 2006.

The central bank on Wednesday released the details of their meeting from May 3-4 as it raced to combat the spiraling high inflation that threatened to slow US economic growth.

Most participants backed a half-percentage point increase in interest rates for June and July each. They also noted that a restrictive policy stance might “well become appropriate” to tame inflation.

The Fed raised the rates by half a point in May, following a 25-basis point increase in March.

At their last meeting, Fed officials also approved a plan to begin reducing the bank’s US$9-trillion portfolio on June 1 by not reinvesting the proceeds from maturing securities into new ones.

The Wall Street Journal reported that in an interview with the newspaper last week, Fed Chair Jerome Powell reiterated the bank’s intention to increase the rates by 50 basis points at its next two policy conclaves.

He also indicated that the unemployment rate might increase as the bank slows demand. In April, the US unemployment rate stood at 3.6%.

The Fed minutes noted that the participants highlighted the challenges the bank faces in fighting inflation and “maintaining strong labor market conditions”.

Also Read: Biden blames gun lobby after 21 people die in school shooting

Fed expresses urgency for raising rates in inflation fight© Mesutdogan | Megapixl.com

Also Read: Dick’s Sporting Goods Inc (DKS) cuts earnings guidance after sales dip

Powell backs aggressive hikes

The Federal Reserve hasn’t raised the interest rates for two consecutive months since 2006. WSJ reported that Powell’s plan is to keep pushing the rates up until prices come down. “This is not a time for tremendously nuanced readings of inflation,” the report quoted him as saying.

Powell indicated that by the fourth quarter, the rates might reach a more neutral state, but it wouldn’t call for a halt in rate increases.

According to the Labor Department last week, the US Consumer Price Index, excluding food and energy, rose at a seasonally adjusted 0.6% in April and climbed 6.2% over the last 12 months.


Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media LLC (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.


Sponsored Articles


Investing Ideas

Previous Next