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Friday, January 27, 2023

Fed slows rate hike and warns US economy is about to freeze

The Fed announced an interest rate hike of 50 basis points and thus met the forecasts of analysts who expected the Federal Reserve to start a recession in rate hikes.

The Fed also cut its growth forecast for 2023 to 0.5% from 1.2% and raised its inflation forecast for 2023, bringing its rates above 5%.

Under the Federal Reserve’s preferred measure, inflation would remain above the 2% target through at least the end of 2025, and above 3% through the end of next year.

The average unemployment rate is projected to rise from 3.7% to 4.6% next year, an increase that is higher than the level historically associated with recessions.

The Fed said, “The (Federal Open Market) Committee is very mindful of inflation risks (…) A continued increase in the target range is appropriate to achieve a sufficiently accommodative monetary policy stance to bring inflation back to 2% over time.” Will be.” An almost identical statement at its November meeting.

The unanimously approved new statement was issued after a meeting in which officials cut rates by three-quarters of a percent in the last four meetings.

The Fed’s key interest rate, which started the year near zero, is now in a target range of 4.25% to 4.50%, the highest since 2007.

Federal Reserve Chairman Jerome Powell is scheduled to hold a press conference to reveal more details about the monetary policy meeting, the last of 2022.

The new rate outlook, a rough estimate of where officials think they could pause in their current rate hike cycle, was released alongside economic projections showing a long battle with inflation yet to come. , and with conditions approaching recession throughout the year.

Source: Scope

World Nation News Desk
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