US Fed to raise interest rates for combating inflation

The Federal Reserve will have to step on a tightrope to assure its actions don’t derail the recovery from the COVID-19 pandemic as Russia’s attack on Ukraine shows new suspicion.

US central lenders on Wednesday are self-assured to take the first step to increase borrowing prices in a bid to check rising inflation before it rises out of control.

The Federal Reserve will have to step on a tightrope to assure its actions don’t derail the recovery from the COVID-19 pandemic as Russia’s attack on Ukraine shows new suspicion in an economy crushed by supply chain snarls and labour scarcities.

“There is no good excuse to that in any economics books,” David Wilcox, a former senior Fed advisor said to AFP. He emphasized that communication from the central bank about its eagerness to act will be key in pulling off its equalizing act.

The central bank’s Federal Open Market Committee is expected to announce its rate decision at 1800 GMT, when its two-day conference concludes.

Fed Chairperson Jerome Powell has told he favors improving the benchmark interest rate by 0.25 percentage points from zero, where it has been since March 2020. It would be the primary in a series of hikes, which would pull back on the stimulus hurried into place at the beginning of the COVID-19 pandemic.

The Fed chief has conveyed assurance that inflation will slink in the coming months as supply chain cases and scarcities are settled in the world’s largest economy. But China’s latest lockdowns of various cities, influencing tens of millions of people and closing off a key supplier to American tech giant Apple, indicates that the pandemic and its uproars are not over.

Policymakers are adequately prepared to handle inflation that is too huge rather than too low, as was the case in the decade after the 2008 global financial crisis, during which inflation and jobs were slow to recover.

Regardless, with the annual consumer price index growing 7.9 percent in February, its fastest rate in four decades, the central bank faces severe criticism that it eluded the inflation danger, and has run too slowly in reaction to rising prices for cars, accommodation and food.

And the battle in Ukraine jointly with Western sanctions on Russia have delivered oil prices rising, although they retreated Tuesday, shutting below $100 a barrel for the first time in three weeks.

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