Washington, Dec 14 (EFE).- The United States Federal Reserve took further action Wednesday to tackle high inflation, although it opted for a slightly less aggressive 50-basis-point hike in its benchmark interest rate.
That move by the Federal Open Market Committee, the Fed’s monetary policy-making body, pushed the federal-funds rate (the rate banks charge each other to borrow or lend excess reserves overnight) up to a target range of between 4.25 and 4.5 percent, a 15-year high.
“I’d like to underscore for the American people that we understand the hardship that high inflation is causing and that we are strongly committed to bringing inflation back down to our 2 percent goal,” Fed Chairman Jerome Powell told reporters after the FOMC’s latest two-day meeting.
“Over the course of the year, we’ve taken forceful actions to tighten the stance of monetary policy. We’ve covered a lot of ground and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do.”
Powell also reiterated a point he has hammered home for much of the year: no other economic goal can take precedence over price stability, which he said is a prerequisite for a functioning economy and strong labor market conditions that benefit all.
The FOMC has now voted to raise the federal-funds rate at seven consecutive meetings dating back to March, with the members of that committee headed by Powell having voted for very aggressive 0.75-percentage-point hikes in four straight meetings between June and November.
In a statement that was virtually unchanged from its previous meeting in November, the FOMC also reiterated that it anticipates that “ongoing increases” in the federal-funds rate will be necessary to bring inflation down to the US central bank’s 2 percent target.
The US’s annual inflation rate came in at 7.1 percent in November, according the Bureau of Labor Statistics.
That figure compares to 7.7 percent in October and 9.1 percent – a four-decade high – in June, when the Fed started moving aggressively to bring down consumer prices.
The central bank attributes the current high inflation rate in the US to pandemic-related supply and demand imbalances, higher prices of food and energy and “broader price pressures.”
It added that Russia’s war against Ukraine is contributing to upward pressure on inflation.
In determining the pace of future rate hikes, the Fed said it will take into account the impact its more restrictive monetary policy is having on economic activity and inflation.
With respect to unemployment, the Fed’s restrictive monetary policy still is not having a major impact on the labor market.
The US jobless rate remained at 3.7 percent in November, unchanged from the previous month, and has held steady at a range of between 3.5 percent and 3.7 percent since March.
A total of 263,000 new jobs were created last month, 2,000 more than in October.
When the Fed announced its fourth consecutive 75-basis-point rate hike in November, Powell said there was still a path to bringing inflation back down to 2 percent without triggering a recession, and the central bank’s latest forecasts continue to reflect that optimism.
In economic projections released in conjunction with the Dec. 13-14 FOMC meeting, Federal Reserve Board members and Federal Reserve Bank presidents raised their expectations for year-end economic growth in 2022, although they did turn more pessimistic about 2023.
The median economic growth projection for 2022 rose to 0.5 percent, up from a forecast in September for a 0.2 percent expansion.
For 2023, the Fed’s latest median projection is for growth of just 0.5 percent, compared with September’s projection of 1.2 percent growth. In June of this year, the central bank’s forecast was for 1.7 percent growth.
The 2024 growth forecast in December (1.6 percent) was largely unchanged from September (1.7 percent).