The U.S. Federal Reserve has increased its interest rates by a quarter percentage point to a range of 5.25-5.50%, marking the highest level in 22 years.
This rate hike, the 11th since March 2022, was enacted without clear indication of further planned increases in the near future.
This strategy is used to curb inflation by making credit more costly, thereby discouraging consumption and investment activities that escalate prices.
As a result, inflation in June decreased to a 3% annual rate, its lowest since March 2021, although still above the Federal Reserve’s 2% target considered healthy for the economy.
The Federal Reserve initiated these increases in response to rising inflation, after keeping rates near-zero to boost the economy during the COVID-19 pandemic.
Despite the economy’s resilience preventing an anticipated recession this year, the president of the U.S. central bank, Jerome Powell, emphasized that returning to the 2% inflation target will require considerable time and effort.
Furthermore, the markets are keenly awaiting June’s PCE index data, an alternative inflation measure favored by the Federal Reserve, and the U.S. GDP data for the second quarter.
Current expectations predict a 2% growth rate in annual projection, while the International Monetary Fund (IMF) forecasts 1.8% growth for the world’s largest economy this year.