the Fed begins its meeting, sharp rate hike in sight

The Monetary Policy Committee of the US central bank (Fed) began its meeting on Tuesday noon, after which a new sharp rise in key rates should be announced to fight against very high inflation in the United States.

The meeting of the Monetary Policy Committee (FOMC) began at 1:00 p.m. (5:00 p.m. GMT) as scheduled, a spokesman for the Federal Reserve (Fed) told AFP.

Discussions will end on Wednesday at midday. A press release will be published at 2:00 p.m. (6:00 p.m. GMT), then the president of the institution, Jerome Powell, will hold a press conference at 2:30 p.m. (6:30 p.m.).

At this meeting, the Fed will update its forecasts for GDP growth, inflation and the unemployment rate.

And, for the fifth time since March, it will raise its key rates, in order to slow down inflation. These set the tone for commercial banks to establish interest rates for their loans to individuals and professionals. They are currently in a range of 2.25-2.50%.

A third increase of three-quarters of a percentage point (75 basis points) is expected. But the increase could be even stronger: almost one in five market players even expects a one percentage point increase, according to the evaluation of CME Group’s futures products.

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The purpose of the rate hikes is in fact to slow down economic activity, in order to ease the pressure on prices, while inflation admittedly slowed down in August thanks to the fall in gasoline prices, but is remains much stronger than expected, 8.3% over one year, with a general rise in prices.

This deliberate slowdown in the economy, which will undoubtedly be accompanied by a rise in the unemployment rate, is all the more difficult to carry out as the recession threatens the American economy, and, more broadly, the world economy.

The excellent health of the labor market, however, gives the Fed room to be aggressive, and hope to be able to achieve the soft landing it is aiming for. The unemployment rate in the United States is 3.7%, one of the lowest in 50 years, and there are not enough workers to fill all the vacancies.

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