FOMC Summary 15 June 2022

The Federal Reserve intensifies its fight against inflation again in June. It raised the key interest rate again, but this time by 0.75%, the biggest hike since 1994.

Last week many investors were predicting a 0.50% hike, somewhat in line with previous speeches. This forecast probably changed after inflation data at the end of last week revealed that inflation has not slowed down at all. On the contrary, an increase was recorded, reaching 8.6%, the highest in 40 years, when a decrease was expected.

Because of this increase, in his statements, Jerome Powell said that this 0.75% hike was completely necessary to reduce inflation. He expects by the end of the year that the central interest rate will double from the current 1.75%.

He also believes that the economy is strong enough to withstand this hike, and unemployment figures are solid. However, he expects that in fact, due to the economic slowdown that this interest rate hike will cause, a rise in unemployment will be very likely.

The US President and the Federal Reserve consider inflation to be the biggest economic threat today, and as such will continue with this monetary policy. Unfortunately, there is also the possibility that these measures will increase the risk of a recession.

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