US Fed Raises Rates by 0.25%, Signals ‘Ongoing Increases’
The US Federal Reserve (Fed) raised interest rates by 0.25% on Wednesday and signaled that future increases in borrowing costs would continue to be implemented as part of its effort to combat inflation.
Facts
- The US Federal Reserve (Fed) raised interest rates by 0.25% on Wednesday and signaled that future increases in borrowing costs would continue to be implemented as part of its effort to combat inflation.
- The central bank highlighted that progress has been made in lowering the pace of price increases from the 40-year highs of last year, with inflation easing to a 5% annual rate in December, according to the Fed's preferred measure.
- Meanwhile, the consumer price index pegged inflation at 6.5% in December — a decrease from June's 9.1% and November's 7.1% but still above the target of 2%.
- Wednesday's move marks the eighth interest rate increase since March 2022, with the federal funds rate now at the target range of 4.5%-4.75% — the highest since October 2007.
- The Fed's next interest rate announcement is expected on March 22, with economists from Goldman Sachs predicting two more 0.25% increases before holding the rate at 5.25% for the remainder of the year.
Sources: Reuters, Al Jazeera, Forbes, and CNBC.
Narratives
- Pro-establishment narrative, as provided by NBC News. By raising interest rates, the central bank hopes it can slow down the economy enough to dampen the soaring inflation. As the theory goes, the more expensive it gets to borrow money or carry a balance on a credit card, the less consumer will spend. And when spending declines, demand will fall, and within some time, the price of everyday goods. There are signs inflation is starting to cool, so it's working.
- Establishment-critical narrative, as provided by The Guardian. Eight Fed rate hikes in little more than a year haven't yet stopped prices from going down. While some of this is due to factors outside of the bank's control, such as supply chain issues and the war in Ukraine, most of it is driven by greedy, monopolistic corporations that continue to raise prices and profit margins. By continuing to raise rates rather than slowing corporate price increases, the Fed is letting workers and consumers take the hit. It's time to open its toolbox and look for other measures to reduce inflation.
