Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures, the Fed said in a Federal Open Market Committee (FOMC) statement.

For the fourth time this year, Federal Reserve (Fed), the central bank of the US, has increased the key interest rates by 75 basis points, thus raising the target range for the federal funds rate to 3-3/4 to 4 per cent, with a view to tame inflation. The Fed seeks to achieve maximum employment and inflation at the rate of 2 per cent over the longer run.

Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 per cent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said.

The Committee will also continue reducing its holdings of treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May.

Fibre2Fashion News Desk (KD)