The Fed Raises Rates by Another 75 Points and Anticipates that it Will Raise them Above 4.5%

The UAE central bank consolidates the largest roche of instruments since the 80s for the love of inflation raises its projections on the price of money.

Interest rates in the United States are already at January 2008 levels, before the collapse of Lehman Brothers. The Federal Reserve has followed the script by announcing on Wednesday the third consecutive increase of 75 basis points. The price of money is already at more than 3%, after five increases since March that point to the fight against inflation as the number one priority of the world's most powerful central bank. So much so that the average of the 12 members of the Federal Open Market Committee already expects interest rates to end up exceeding 4%. With over 80% of analysts opting for a rise of 0.75%, the biggest attraction of this Wednesday's statement lay in the medium-term forecasts. 

Right now, the big unknown is whether the Fed will start to loosen the hikes of the last few months, as Powell suggested at the last meeting in July. And the projections indicate that, for now, it will not happen: rates would rise at the end of the year to 4.4%, compared to the 3% of the June consensus; in 2023 to 4.6%, eight tenths more than the previous forecast; and in 2024 to 3.9%, with an increase of half a point. In the long term, the members of the Federal Reserve are leaning towards rates of over 2%.

The new tightening comes after the bad inflation data for August (8.3%), which was above forecasts, despite falling for the second consecutive month. The energy hikes continue to push up prices, in a context in which unemployment continues at very low figures (3.7%), which gives arguments to the hawks to continue with the rate hikes. In fact, the United States is already accumulating the longest bullish streak since the controversial mandate of Paul Volcker during the 80s: 25 basis points in March, 50 in May, 75 in June, 75 in July and another 75 this Wednesday.

In the statement, the Fed repeats that it is "very attentive to inflationary risks" and anticipates further hikes. In order for rates to be in the range predicted by the central bank, another hike of 75 basis points should happen in November and another in December. That is, the rate of slowdown that some predicted for next month would not occur, although a group of committee members points to an increase of 100 basis points, and not 125, between now and the end of the year.