US central bank hikes interest rate, blames Russia

US central bank hikes interest rate, blames Russia

The US Federal Reserve’s Federal Open Market Committee has boosted its benchmark interest rate by 25 basis points, the first increase in over three years as the policymaking body seeks to rein in near-record inflation. The new rate will run between .25% and .5%.

In addition to the rate hike announced Wednesday, six more are planned throughout 2022, according to a statement from the privately-owned institution.

The Fed noted it “seeks to achieve maximum employment and inflation at the rate of 2% over the long run,” insisting the unemployment rate would finish out the year at a reasonable 3.5%. As of February, it stood at 3.8%.

The Fed also announced it plans to start offloading Treasury securities, agency debt and agency mortgage-backed securities in the near future. Chairman Jerome Powell told journalists after the meeting that the central bank could begin selling those assets as soon as May, producing the equivalent of another rate hike, which he was quick to pin on Russia.

Powell insisted the committee was “determined to take the measures necessary to restore price stability,” acknowledging the “risks of further upward pressure on inflation and inflation expectations.”

While the White House had initially claimed the soaring US inflation was only “transitory,” the Fed later admitted the problem was more serious than they believed and have belatedly attempted to wrestle it into submission.

Individual committee members admitted they expect higher-than-usual inflation, “reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures,” while projected GDP was downgraded from 4% to 2.8% - a drop blamed on the conflict in Ukraine.

“In the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity,” the committee said, acknowledging that beyond the “tremendous human and economic hardship,” they were uncertain what the conflict between Russia and Ukraine would ultimately bring.

Russian President Vladimir Putin hit back against the endless torrent of “blame Russia” narratives on Wednesday, telling “ordinary westerners” that they were being conned into blaming their own government's problems on Moscow.

“You are being persistently told that your current difficulties are the result of Russia’s hostile actions and that you have to pay from your own pockets for the efforts to counter the alleged Russian threat,” Putin said in a speech. “All of that is a lie.”

The rush to hike interest rates at a pace not seen in years, in an attempt to bring inflation back under control, has been met with cries for caution from some experts, as the last time interest rates were raised so quickly, it triggered a significant recession. With certain parts of the US economy still not recovered from government-imposed pandemic policies, such an outcome could finish them off, critics said.

Some financial experts were less than sanguine about the prospect of multiple rate hikes over the course of the coming year, suggesting the 'medicine' might do more harm than good – even if it didn't end up killing the patient.

“We might be on the cusp of the Fed raising rates at the same time there is a minus sign in front of GDP,” Peter Boockvar, chief investment officer of Bleakley Advisory Group, wrote in response to the Fed's move, according to CNBC. “What an awful position to be in.”

US gas prices have reached record highs, surging 38% over the last 12 months, while grain and other food staple commodities are in short supply. Meanwhile, nearly all market indicators have outstripped the Fed’s 2% inflation target. 

Source: www.rt.com

The last notes - Экономика

most read news

#Экономика

Germany may face shortages of such staples as toilet paper and cardboard if Russian gas supply dwindles in the coming months, German outlet Zeit Online reported on Wednesday.Operating paper plants may
подробнее...

Pay rises in Britain could fall behind inflation by almost 8% later this year, which will be the biggest fall in real wages for 100 years, the Trades Union Congress (TUC) said in a report published on
подробнее...

The EU is planning to increase liquefied natural gas (LNG) imports from Nigeria amid concerns that supply from Russia may be cut, according to the deputy director general of the European Commission’s
подробнее...

The business climate has substantially worsened in Germany, with industries feeling increasingly concerned about the coming months, according to a survey by a German think tank released on Monday.
подробнее...

Twitter operated at a loss in the second quarter and suffered a decline in revenue from a year earlier, reflecting struggles that the company blamed partly on its pending sale to billionaire Elon
подробнее...

The Chinese currency the yuan outperformed the euro by trading volume on the Moscow Exchange (MOEX) for the first time on record, trading data from Friday shows.According to the data, the trading
подробнее...

Japanese companies are no in a hurry to quit the Russian market, amid fears of being unable to return and having to find new suppliers, the Japan Times reported this week, citing a survey from the
подробнее...

The EU will allow transactions needed for Russian state-owned companies to sell oil to third countries, the EU Council said in a statement on Thursday.“With a view to avoid any potential negative
подробнее...

The Ukrainian government has moved to delay payments on foreign debt for two years, the country’s media reported on Wednesday. The restructuring will have to be approved by the creditors first, the
подробнее...

Ukraine’s state-run energy company Naftogaz has defaulted on its foreign debt, the firm announced on Tuesday.Naftogaz was unable to make payments on Eurobonds before a grace period expired, the
подробнее...

The German government and energy major Uniper are reportedly nearing an agreement under which the state will inject more than €5 billion ($5.1bn) into the business. The total commitment is likely to
подробнее...

The Russian Finance Ministry has announced a return to the public debt market by issuing a limited amount of OFZs, ruble-denominated sovereign bonds, in September, Deputy Finance Minister Timur
подробнее...

China’s C919 narrow-body jet, the country’s first domestically designed commercial passenger aircraft, is nearing certification, having successfully passed test-flight tasks, state-owned manufacturer
подробнее...

The EU has blocked a proposal to impose sanctions on Russian titanium producer VSMPO-AVISMA, the Wall Street Journal (WSJ) reported on Thursday.According to the report, the decision was made after
подробнее...

Cargo shipments via Russia’s Northern Sea Route in the first half of this year were 5% higher than in the same period of 2021, Russian Deputy Prime Minister Alexander Novak said on Monday.“In 2021,
подробнее...

Inflation in Britain accelerated at a faster pace than expected in June and hit 9.4% year-on-year, the highest increase since February 1982, according to data released by the Office for National
подробнее...

EU energy ministers have agreed on an unprecedented plan that will see member states voluntarily slash their gas consumption by 15% from August until next spring. The deal does come with exemptions
подробнее...

Creditors of Ukraine’s state-owned energy company Naftogaz have rejected the firm’s request for a two-year debt payment freeze, the country’s media reported on Monday.Naftogaz made the proposal
подробнее...