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US Central Bank head warns about higher interest rates than expected

US Central Bank head warns about higher interest rates than expected

The US central bank’s head has reportedly issued a warning that officials can potentially increase interest rates faster and more significantly than initially anticipated, in an effort to stabilize the market.

Following the statement, which came just a few weeks ahead of the bank's next rate announcement, US stocks plummeted, and the dollar increased.

Many analysts had anticipated an additional 0.25 percentage point rise. However, the statements imply that the bank could act more strongly.

The Fed increased its benchmark rate during the previous year to above 4.5%, the highest point since 2007, in response to prices increasing at the quickest rate in decades. The US inflation rate stood at 6.4% in January this year.

While less than the rates in the past, it is still far more than the 2% rate that is seen to be healthy. Jerome Powell, Federal Reserve chairman, noted that recent statistics suggesting that development may be stalling have officials concerned.

According to Powell, this could force the bank to raise rates over the 5% to 5.5% that officials had projected in December.

Increasing borrowing costs is one technique for slowing overall price hikes in the economy.

Recent remarks by Powell about potentially increasing the pace of rate hikes drew some criticism from lawmakers. They said that the actions would result in an economic downturn that would result in millions of unemployed people while doing little to address the sources of the inflation crisis, including the conflict in Ukraine as well as supply chain concerns.

The unforeseen 0.5% jump in US prices from December 2022 to January 2023 was followed by stronger-than-expected monthly figures on retail trade and recruitment.

Officials of the Federal Reserve intend to calm the economy and relieve pressures driving up prices by increasing borrowing costs in an effort to decrease demand for credit for homes, business developments, as well as other purchases.

The move has already led to significant setbacks in the housing industry and other rate-sensitive sectors of the economy.

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Pursuing her professional career as a content writer for over two years now, Pooja Sharma is endowed with a post-graduate degree in English Literature. The articles that she writes are a balanced blend of her ever-growing love of language and the technical expertise that she has gained over the years. Currently Pooja pens insightful articles for Newsorigins and numerous other websites, covering subjects such as business, finance, and technology.