Adversitement
Federal Reserve Raises Interest Rates for the 10th Consecutive Time Amidst Soaring Inflation
Published On : 2023-07-27T17:03:00+0530 [ IST ] |
Author : Mayur_Tembhare
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United States :
The Federal Reserve's policy-making committee has taken decisive action once again in response to the persistent and surging inflation that has gripped the nation for over a year. In an effort to curb rising prices and tame an overheated economy, the committee, led by Federal Reserve Chair Jerome Powell, has raised interest rates for the 10th consecutive time.
Interest rates have been a subject of ongoing debate among economists, with some questioning their efficacy as an economic tool. Powell himself has acknowledged the limitations of using interest rates, referring to them as "famously blunt tools."
The latest rate hike, implemented on Wednesday, brings the fed funds range to 5.25% to 5.5%, making borrowing more expensive and aiming to slow down economic growth. However, the effectiveness of these rate increases in combating inflation remains a point of contention among experts.
Industries sensitive to interest rates, such as auto sales and housing, have already exhibited signs of reacting to the rising rates. Home sales have slowed down, and analysts predict that the full impact of the rate changes may take at least a year to materialize due to the "long and variable lag" that typically follows such adjustments.
Joseph LaVorgna, Chief U.S. Economist of SMBC Group and former economic adviser in the Trump administration, suggests that most of the recent economic changes might not be directly attributable to the Fed's rate decisions. Powell himself concedes that inflation has indeed decreased from its elevated levels, primarily due to the easing of tensions from the Ukraine conflict. However, core inflation, which excludes food and energy, remains stubbornly high at 4.8% in June, well above the Fed's target of 2%.
Looking ahead, Federal Reserve Chair Jerome Powell expects inflation to continue on a downward trajectory, but he anticipates that it may not reach the Fed's target until 2025. Despite this projection, the Fed remains cautious and vigilant, closely monitoring jobs reports and inflation data leading up to the next policymaking committee meeting in September. It is during this meeting that they will determine their next course of action on interest rates.
As the Federal Reserve navigates the challenging economic landscape, they face the daunting task of determining whether their tools will lead to a soft landing for the economy or pose potential risks to its stability. Balancing the need to combat inflation while fostering sustainable economic growth remains a delicate balancing act for the central bank.
NoneSource : US Fedral Authority
Tags : Economy , Policy-making Committee , Inflation , Federal Reserve , Core Inflation , Economic Tool , Interest Rate-Sensitive Industries , Jerome Powell , Interest Rates , Rate Hike , Borrowing ,
Summary : In response to the persistent surge in inflation gripping the nation for over a year, the Federal Reserve's policy-making committee has implemented its 10th consecutive interest rate hike. Despite acknowledging the limitations of interest rates as economic tools, Fed Chairman Jerome Powell aims to tame the overheated economy and curb inflation through these rate increases. However, experts are divided over the actual impact of the rate hikes, with some industries, like auto sales and housing, already feeling the effects. As the Fed monitors inflation and job reports, they are cautious about the economic landscape's uncertainties and plan to assess the effectiveness of their measures before their next decision in September.
Adversitement