Inflation is above target and interest rates may exceed previous expectations

confirmed Federal Reserve Chairman, Jerome Powell, That inflation in America is still high, and above the target rate of 2%, stressing the importance of “the US central bank remaining cautious about declaring victory” in its battle against inflation.

Powell pledged in a press conference on Wednesday evening, after the US Federal Reserve’s decision to raise interest rates by a quarter of a percentage point, to further increases in interest rates during the coming period in order to control inflation and reduce it to the target level.

Although Powell welcomed the recent decline in inflation data, he said it was not enough to bring the consumer price index back to 2%.

Powell added that the US “central” has not yet reached sufficient interest rates to curb high inflation, pointing out that the US economy has slowed sharply over the past year, while consumer spending and housing activity continue to decline.

Powell continued, “We will need significantly more evidence” that inflation is receding, to make sure that it is moving back towards the target, noting that the Federal Reserve is discussing two more interest rate increases.

Powell revealed that the “central” may exceed the maximum interest rate on federal funds, which he set in his expectations for the month of December, amounting to 5.1%.

He emphasized that the central bank is closely monitoring financial conditions, reiterating that it is important that financial conditions reflect the Fed’s tightening.

Powell pointed out that there is a difference of opinion on how quickly inflation will decline, and he hopes that the inflation numbers in the coming months will give a positive boost in sentiment.

On Wednesday, the Federal Reserve raised interest rates by 25 basis points, as was widely expected, after raising them by 50 basis points last December following four consecutive increases of 75 points, bringing the benchmark interest rate to a range from 4.50% to 4.75%, which is the highest level since 2007, that is, before the global financial crisis.

President of Nasser Al-Saeedi and Partners Company, Dr. Nasser Al-Saeedi

For his part, the head of Nasser Al-Saeedi and Partners, Dr. Nasser Al-Saeedi, said that the statements of the Chairman of the Federal Reserve were not a surprise to the markets and the bank’s decision came upon its expectations of increasing interest rates by 25 basis points, and therefore optimism occurred in the markets as a result of Jerome Powell’s statements.

While Powell stressed that the Fed remained cautious about declaring victory in its battle against inflation, Al-Saidi said that Powell mentioned in his speech the decline in inflation rates globally as a result of the decline in energy prices and the improvement in transport prices, but the core inflation rate remains high with the continuation of the rise in prices. Services.

According to Al-Saidi, the markets did not focus with Powell’s talk about continuing quantitative tightening and reducing his portfolio of assets in light of the rise in interest rates.

He referred to the Fed’s satisfaction with the current conditions and the improvement in the inflation rate during the past two months, and therefore it is clear that the current “Federal” policy will continue.

Al-Saeedi continued, “The markets expect the level of interest rates to reach less than 5%. If it is expected to reach 5%, it may exceed it.”

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