The Fed’s benchmark federal-funds rate is currently in a range between 1.5% and 1.75% and expected to rise above 3% this year. The increase has already led to a spike in mortgage costs. A 30-year fixed-rate loan now costs close to 6%, up from 3.25% at the start of the year.
Powell said rate rises were needed in order to bring demand down and soften price increases. But he admitted that many of the drivers of inflation, including the war in Ukraine’s impact on energy prices and soaring food costs, were beyond the control of the Fed.criticized the Fed’s rate moves. Gas and food prices will not fall because of the rate increases, she argued. “Rate hikes won’t make Vladimir Putin turn his tanks around and leave Ukraine,” she said.
Raising rates would “make it more expensive to invest which in turn is going to throw people out of work and when they are out of work they will have less money to spend”, she said.the US needs unemployment, currently 3.6%, to rise to 5% for five years to contain inflation. Powell said he would have “a lot of humility” about forecasting where the economy was heading over the next five years. “But there are certainly paths to get inflation down to 2% with outcomes that are less troubling,” he said.
The American Fed says recession a possibility due to increasing rates, whereas the Australian version says 'no'. It's clear that the Americans are right here.
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