The Federal Reserve confirmed market forecasts and increased your interest rate by 75 basis points as the United States (like the rest of the world) grapples with the worst inflation seen in decades.
This makes the reference range in 3.75-4 percenta level not seen in almost 15 years, when the interest rate was 4.25 percent. The decision was unanimous.
Although members of the United States Federal Reserve Bank made it clear that increases in the benchmark would continue until the inflation target was reached, they explained that they would take the ‘damage’ that the measure causes in the economy in future meetings.
“In determining the pace of future increases, the Committee will take into account the cumulative tightening of monetary policy; delays with which monetary policy affects economic activity, inflation and economic and financial evolution“, they explained in their statement.
In the Fed’s view, Russia’s war in Ukraine will continue to pose risks to the global economy and inflation, which the committee will monitor closely.
This is the fourth time so far in 2022 that the Central Bank has raised the benchmark by 75 basis points. The Fed rate has risen 325 basis points in the current growth cycle that started in March.
anyway, inflation in the EU It shows no signs of easing: In September, the consumer price index was 8.2 compared to the same month, but since 2021. On a monthly basis, prices rose 0.4 percent from August to September.
The Fed’s message to the markets in recent months can be summed up as the rate increases it will continue until inflation subsides. However, figures such as Joseph Stiglitz, winner of the Nobel Prize in Economics, have pointed out that the measure will “kill the economy”.
“Increase the interest rate it will not create more food or more resourcesbut to move industries and send them to other countries, which is what happened in the United States and that made the problem worse in the United States, that’s not based on good economic analysis, but in a chain reaction“, he said in October.
And what will the Bank of Mexico do now?
According to opinion Gerard Esquiveldeputy governor of the local central bank, Mexico is in a better position than the US to achieve convergence of the inflation target (3 percent, +/- one percentage point).
During the meeting in different phases economic cycle with very different inflationary pressures, Banxico may consider delinking its rate hikes from those of the Federal Reserve.
The new Banxico decision on monetary policy will be announced next Thursday 10.11.
With information from AP and Bloomberg