The US Federal Reserve on Tuesday raised interest rates by a quarter percentage point and signalled six more such increases this year, launching a campaign to tackle the fastest inflation in four decades even as risks to economic growth mount.
Policymakers led by Chairman Jerome Powell voted 8-1 to lift their key rate to a target range of 0.25 to 0.5 per cent, the first increase since 2018, after two years of holding borrowing costs near zero to cushion the economy from the pandemic.
St Louis Fed President James Bullard dissented in favour of a half-point increase, the first vote against a decision since September 2020.
The increase is likely to be the first of several to come this year, as the Fed said it “anticipates that ongoing increases in the target range will be appropriate".
Speaking at a news conference, Mr Powell said he believed the economy remains sturdy enough for the Fed to carry out a series of rate increases without causing a downturn.
“All signs are that this is a strong economy,” he said, “one that will be able to flourish in the face of less accommodative monetary policy.”
In the Fed’s so-called dot plot, officials’ median projection was for the benchmark rate to end 2022 at about 1.9 per cent — in line with traders’ bets but higher than previously expected — and then rise to about 2.8 per cent in 2023.
“We are attentive to the risks of further upward pressure on inflation and inflation expectations," Mr Powell added.
They estimated a 2.8 per cent rate in 2024, the final year of the forecasts, which are subject to even more uncertainty than usual given Russia’s invasion of Ukraine and new Covid-19 lockdowns in China are buffeting the global economy.
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington, the first held in person — rather than via videoconference — since the pandemic began.
“The implications for the US economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upwards pressure on inflation and weigh on economic activity.”
The Fed said it would begin allowing its $8.9 trillion balance sheet to shrink at a “coming meeting” without elaborating. The purchases of Treasuries and mortgage-backed securities, which concluded this month, were intended to provide support to the economy during the Covid-19 crisis and shrinking the balance sheet accelerates the removal of that aid.
“I saw a committee that is acutely aware of the need to return the economy to price stability,” Mr Powell told reporters, characterising the mood around the the table as policymakers debated the outlook.
The Fed faces the arduous task of securing a soft landing for the world’s largest economy for the first time since the early 1990s. Tighten too slowly and it risks allowing inflation to run out of control, requiring even tougher action. Shift too quickly and the central bank could affect markets and tip the economy into recession.
Complicating the job, Russia’s invasion of Ukraine has sent the cost of fuel, food and metals racing even higher, raising fears of 1970s-style stagflation by posing threats to prices, growth and financial-market stability.
In new economic projections, Fed officials said they see inflation significantly higher than previously forecast, at 4.3 per cent this year, but still coming down to 2.3 per cent in 2024. The forecast for economic growth in 2022 was lowered to 2.8 per cent from 4 per cent, while unemployment projections were little changed.
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
Company%20profile
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The bio
Date of Birth: April 25, 1993
Place of Birth: Dubai, UAE
Marital Status: Single
School: Al Sufouh in Jumeirah, Dubai
University: Emirates Airline National Cadet Programme and Hamdan University
Job Title: Pilot, First Officer
Number of hours flying in a Boeing 777: 1,200
Number of flights: Approximately 300
Hobbies: Exercising
Nicest destination: Milan, New Zealand, Seattle for shopping
Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been
Favourite place to visit: Dubai, there’s no place like home
KINGDOM%20OF%20THE%20PLANET%20OF%20THE%20APES
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Temple numbers
Expected completion: 2022
Height: 24 meters
Ground floor banquet hall: 370 square metres to accommodate about 750 people
Ground floor multipurpose hall: 92 square metres for up to 200 people
First floor main Prayer Hall: 465 square metres to hold 1,500 people at a time
First floor terrace areas: 2,30 square metres
Temple will be spread over 6,900 square metres
Structure includes two basements, ground and first floor
The%20Beekeeper
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COMPANY%20PROFILE
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It Was Just an Accident
Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
RESULTS
1.45pm: Maiden Dh75,000 1,200m
Winner: Lady Parma, Richard Mullen (jockey), Satish Seemar (trainer).
2.15pm: Maiden Dh75,000 1,200m
Winner: Tabernas, Connor Beasley, Ahmed bin Harmash.
2.45pm: Handicap Dh95,000 1,200m
Winner: Night Castle, Connor Beasley, Satish Seemar.
3.15pm: Handicap Dh120,000 1,400m
Winner: Mystique Moon, Sam Hitchcott, Doug Watson.
3.45pm: Handicap Dh80,000 1,400m
Winner: Mutawakked, Szczepan Mazur, Musabah Al Muhairi.
4.15pm: Handicap Dh90,000 1,800m
Winner: Tafaakhor, Sandro Paiva, Ali Rashid Al Raihe.
4.45pm: Handicap Dh80,000 1,950m
Winner: Cranesbill, Fabrice Veron, Erwan Charpy.
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
