Inflation: US central bankers call for a drastic increase in key interest rates

money inflation

US Federal Reserve calls for drastic interest rate hike

Inflation: the highest in 40 years

In Germany, inflation in March was at its highest level in 40 years. One reason for this: high energy prices. But things are also getting more expensive in the supermarket and consumers are having to dig deeper into their pockets here too.

A senior member of the Federal Reserve is now going on the offensive. Inflation must be controlled. By the end of the year, he intends to raise interest rates in the US much more than all forecasts expected.

DUS Federal Reserve banker James Bullard has called for a sharp increase in US interest rates to 3.5 percent by the end of the year to curb high inflation. “Inflation is too high,” the president of the US Federal Reserve’s St. Louis branch said Monday night in a virtual conference. “We need to control inflation.”

The Fed raised interest rates by 0.25 percentage point to 0.5 percent last month, and the Fed’s projections at the time called for a year-end rate of about 1.9 percent. The market is currently assuming a level of 2.5 to 2.75 percent.

Consequently, Bullard’s target would be considerably more aggressive. However, the increase to 3.5 percent should not be done in one step, Bullard said, and increases should be no more than 0.5 percentage point per step.

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The rate of inflation will fall back partly on its own, he said. But this does not apply to the entire wave of inflation. In March, US inflation hit 8.5 percent, the highest since 1981. At least 3.6 percentage points of that wouldn’t go down on its own. “And that’s well above our 2 percent target,” Bullard said. So the Fed must act

He added that the US economy will not enter a recession and that the unemployment rate, currently 3.6 percent, is likely to fall below 3 percent this year. The war in Ukraine will likely have a significant impact on economic development in Europe, but the effects in North America will remain limited.

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