The Federal Reserve Chair, Jerome Powell, and the United States Central Bank raised the benchmark bank rate by 75 basis points (bps) yesterday. The current target for the federal funds rate set by the Fed is 3.25 percent.
The action by the central bank comes in the wake of a report on the consumer price index (CPI) that was released the week before showing that annual inflation in the United States increased by 8.3% in the most recent month.
Jerome Powell, who is now serving as the head of the Federal Reserve, has said in the past that there is a plan in place to reduce the pace of inflation.
The head of the Federal Reserve said that they intend to return to a suitably restrictive attitude in order to restore price stability. However, the chair also pointed out that the committee is divided between 100 and 125 basis points of further tightening for the remainder of this year.
The Fed:
The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate.
August’s annual consumer price index (CPI) reading was down from the 8.5% in July, but still far over the Federal Reserve’s 2% objective for the long run. As rental prices rise, the core gauge increased even more than expected, to 6.3% from 5.9%, indicating that price projections remain very uncertain and inclined to the upside.
