The inflation rate in the United States is on the rise. The US Federal Reserve is now considering a major interest rate hike. Fed Chairman Jerome Powell said interest rates could have increased by 0.5 percentage points.
To combat high inflation, the US Federal Reserve will consider raising interest rates by 0.5 percentage points at its next meeting in early May. Central Bank President Jerome Powell said this during an International Monetary Fund (IMF) event in Washington.
With inflation and the 0.25 percentage point hike in interest rates in March, it was “appropriate to move a little faster,” Powell said. Powell said a 50 basis point hike will be under discussion at the May 4 Fed board meeting.
Powell: “It will be a great challenge”
The goal is to use central bank tools in such a way that supply and demand adjust again and inflation falls. The economy should cool in a way that doesn’t correspond to a “recession,” Powell said.
The balance will not be easy. “It will be a great challenge. We will do our best to make it happen,” promised Powell.
“And restoring price stability is absolutely critical,” Powell said. This is the prerequisite for a strong job market and financial market stability, she said.
Investors expect further rate hikes
The key interest rate for the world’s largest economy has been between 0.25 and 0.5 percent since March. On the markets, increases of more than two percentage points are expected for this year alone.
The pressure on the Fed is great because the inflation rate is at its highest level in decades, which is reducing consumers’ purchasing power. In March, consumer prices increased by 8.5% compared to the same month last year. The Fed is aiming for an inflation rate of two percent over the medium term.