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Fed Starts Debating Potential Interest Rate Hikes

Fed - interest rate hike - Jerome Powell - El American

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The U.S. Federal Reserve began Tuesday the meeting of its Federal Open Market Committee, which will conclude tomorrow and is expected to consider whether to set a date for the anticipated interest rate hike, currently between 0% and 0.25%.

At the end of its last meeting in December, the Fed left interest rates unchanged but accelerated the reduction of its bond-buying program, the economic stimulus it put in place in the face of the crisis caused by Covid-19 and indicated that it plans to eliminate it completely in March.

However, since that meeting in the middle of last month, it has become known that the year-on-year rate of inflation in the United States rose in December to 7%, the highest figure recorded since 1982, which redoubles the pressure on the Fed to be more aggressive in adopting measures to contain the rise in prices.

On January 11, Fed Chairman Jerome Powell stood before a Senate committee for a second term at the helm and assured that he would prioritize the fight against high inflation, even if it means putting less emphasis on the goal of full employment.

“There is no legal basis for preferring full employment to price stability or vice versa. They are equal. However, at different times one of them may deviate more from the target and that’s the one we need to focus on a little bit more,” Powell explained in his speech.

“Sometimes it’s full employment and sometimes it’s inflation. I think right now it’s inflation,” the Fed chairman added.

Asked about the possibility, hinted at by several Fed governors, of three to four interest rate hikes over the course of 2022, Powell simply replied that the body will use all the tools at its disposal.

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