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Fed will have to raise rates until at least early 2023 in the face of inflation, official says

The fight against inflation must be the priority of the US central bank (Fed), one of its officials declared this Friday, which foresees increases in reference rates at least until the beginning of 2023, to stop this rise in prices.

The Fed will continue to raise its key interest rates. In any case, Christopher Waller, one of the institution’s governors, declared it on Friday. According to him, these increases should occur at least until 2023, to curb inflation.

“Getting inflation back significantly and persistently towards our 2% target (will require) policy rate hikes until at least early next year,” Waller said, adding that the precise pace will depend on how the economy evolves. economy.

To curb demand, and thus relieve pressure on prices, the powerful Federal Reserve has been gradually raising rates since March. These are now in a range of 2.25 to 2.50%.

An increase of 0.75 points is expected

An additional increase of three-quarters of a percentage point is expected at the next meeting on September 20-21. “I support a significant increase … to put our policy in a position to really slow demand,” said Christopher Waller, warning, however, that bringing inflation to around 2% considered healthy for the economy “will take time.” “

Inflation in the United States slowed in July, after reaching its highest level in more than 40 years in June. At 8.5% per year, according to the IPC index, it is still very high, however.

“Signs of moderation in economic activity”

He believes that recession fears that “have faded and the strong US job market give us the flexibility to be aggressive in our fight against inflation.”

“We do not enter” a recession in the first half of 2022, he even stressed, while the figures “confirm that the Fed has reached its (target) of full employment, so my attention is focused on the fall in inflation”.

However, he noted “signs of moderation in economic activity,” particularly in the real estate market. “As we continue to raise rates, we will have to see, month by month, how households and companies adjust to the stricter financial conditions and how this adjustment affects inflation,” the governor also stressed.

Author: N.LC with AFP
Source: BFM TV

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