Friday, February 3

The Fed in favor of raising rates at its March meeting

The US Federal Reserve is in favor of raising its reference rates at its next meeting in mid-March, its president, Jerome Powell, said on Wednesday.

“I would say that the committee is in favor of raising rates … at the March meeting, assuming conditions are right to do so,” Powell said at a news conference after the two-day meeting of the agency’s monetary committee. .

The Fed kept its interest rates at zero on Wednesday.

In its statement prior to Powell’s statements, the agency explained that “with inflation well above 2% and a strong labor market, the (monetary) committee believes that it will soon be appropriate to raise the range of reference rates.” Powell was in charge of specifying the terms for the increase.

Wall Street, which reacted upwards with the post-meeting text, turned red after the press conference.

Those responsible for the Fed also stressed that they will end their monthly purchases of assets with which they injected money into the economic circuit, “at the beginning of March.” Ending these purchases of Treasury bonds and titles in general is a condition for raising rates.

Benchmark rates were cut in March 2020 to deal with the coronavirus pandemic, supporting consumption and investment.

Now the objective of the organism when raising its interest rates is to influence prices by slowing down demand. Higher rates make credit more expensive for individuals and companies.

The Fed also noted a reduction in supply problems, which should improve the supply of goods and materials and help curb inflation.

Prices rose 7% in 2021, their biggest increase since 1982.

Powell did not rule out, however, the possibility of prolonged inflation, or higher price increases.

“There is a risk that high inflation will continue; there is a risk that it will increase more rapidly,” he added.

The labor market is “very, very strong and my deep feeling is that we can raise rates without seriously hurting it,” the Fed chairman said.

“Indicators of economic activity and employment continue to strengthen,” the Fed said in its statement. The sectors hardest hit by the pandemic, including services, “improved in recent months” although they are affected by the recent increase in infections by the omicron variant of coronavirus.

“The increase in employment has been solid in recent months and the unemployment rate has dropped considerably,” said the Fed, whose other mandate – in addition to keeping inflation at bay – is to favor full employment.

jul-Dt / vgr / mr / lda