The fight against inflation is much more bitter than the governors of the Federal Reserve (Fed) thought.
Jerome Powell, president of the central bank of the United States, surprised the stock market yesterday, for the worse, when he assured that interest rates will continue to rise throughout this year, even more than previously expected.
This is how he explained it in his appearance in Congress, which today will have its second chapter. According to their data, inflation has reversed the slowdown seen at the end of 2022. Sustained strong growth in economic activity early this year may prompt the Fed to accelerate money price increases to combat escalating inflation. inflation.
Since last March, when the Federal Reserve became convinced that inflation had entrenched, there have already been eight consecutive rises in interest rates. They went from zero or almost to 4.50%-4.75%, one of the largest increases in recent decades.
In this way, Powell showed for the first time in recent months that another quarter-point rise is not a pace that is chiseled in stone, alluding to a higher-than-expected rise.
“The latest economic data is much stronger than expected and rates will almost certainly have to be increased more than we had anticipated.” At the conclusion of their January meeting, Powell maintained that victory could not be declared, but that improvements were observed. So he bet on more increases, although 0.25%.
"If the totality of these data indicates that tightening faster guarantees results, we will prepare to raise rates at a faster pace," he added.
This means that the previously marked ceiling, somewhat above 5%, will be situated even higher. This means that instead of the 5.1% established as a goal, it climbs to at least 5.75%, although Powell did not specify before the legislators how far it can go.
His speech came at a time when there was optimism that the Fed was on the way to reining in inflation. His words had an impact on Wall Street, where stocks plummeted shortly after the session opened, while Treasury bonds soared.
Powell insisted that the trend detected indicates that the fight is not over.
