Mettis Global News
Mettis Global News
Mettis Global News
Mettis Global News
Mettis Global News AD
Mettis Global News AD

Trending :

Fed to raise rates ‘expeditiously’ to cool economy: official

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

May 10, 2022: The US central bank has the right tools and will act quickly to cool the economy and bring down “unacceptably high” inflation, a senior Federal Reserve official said Tuesday.

After raising the benchmark lending rate by three-quarters of a percentage point in two steps since March, New York Fed President John Williams said he expects the Fed's policy committee “will move expeditiously in bringing the federal funds rate back to more normal levels this year.”

Speaking at a conference in Eltville am Rhein, Germany, Williams said he is confident the rate hikes will “turn down the heat” on the economy and bring inflation down to around 2.5 percent next year, while maintaining a strong economy.

“Although the task is difficult, it is not insurmountable. We have the tools to return balance to the economy and restore price stability, and we are committed to using them,” he said.

The US central bank slashed the key borrowing rate to zero at the start of the Covid-19 pandemic in March 2020 as part of its efforts to stave off a deep economic crisis.

But as the world's largest economy came roaring back, global supply shortages meant demand outstripped supplies. This sent prices soaring, especially for housing and autos, with inflation rates not seen since the 1980s, while employers face a shortage of workers.

The Russian invasion of Ukraine, combined with renewed Covid-19 lockdowns in China, has exacerbated those inflationary pressures.

The Fed's policy committee last week raised the key rate by a half point, the biggest hike since 2000, and said more big increases were likely.

Williams said Fed rate hikes “are especially powerful in the very sectors where we see the greatest imbalances and signs of overheating.”

The move will cool demand in rate-sensitive sectors and “turn down the heat in the labor market, reducing the imbalance between job openings and available labor supply,” he said.

Other major central banks also are taking action, and the combined efforts should help restore balance globally, he said.

US financial markets have responded to the Fed's actions, with mortgage rates climbing above five percent.

But Wall Street stocks have taken a battering in the past few sessions, with the broad S&P 500 falling to its lowest point in more than a year, amid concerns about the impact of rising rates and fears of a sharp economic slowdown.


Posted on: 2022-05-10T22:56:37+05:00