The Fed is expected to raise interest rates sharply

Experts fear that one day these factors could lead the world’s largest economy to a recession.

On May 3 – 4, the US Federal Open Market Committee (FOMC) will hold a policy meeting. Top officials signaled strongly that they would raise rates by half a percentage point and announced plans to drastically reduce their debt holdings.

(Illustration image – Photo: Xinhua)

Top US Federal Reserve (FED) officials, including Chairman Jerome Powell, hinted that a half percentage point increase in interest rates is highly likely to be agreed at the 2-day policy meeting. next day and double the 0.25 percentage point increase the FOMC deployed in March.

The Fed is expected to announce a plan to cut trillions of dollars in bonds and mortgage-backed securities that the Fed buys to support the economy during the COVID-19 pandemic. This will increase borrowing costs.

Both moves would tighten lending conditions in the world’s largest economy and potentially eliminate consumer prices rising at a rate not seen since the 1980s.

It is expected that raising interest rates is one of the main policies of the Fed this year. However, experts warn that the FED needs to strike a delicate balance to prevent the risk of economic decline, amid the context that the US economy has to face many external shocks, such as the conflict with Russia – Ukraine and the blockade orders to prevent COVID-19 in China.

Earlier, speaking at a discussion session on the global economy on the sidelines of the spring meeting of the International Monetary Fund (IMF) and the World Bank (WB), Fed Chairman Jerome Powell emphasized, in his view According to him, a sharp increase in interest rates is reasonable and a 0.5% increase will be proposed at the next policy meeting in May.

Mr. Powell’s statement is also consistent with previous predictions that the FED will not only raise interest rates by 0.25%, but increase the adjustment margin in the context of US inflation at the highest level in more than 40 years.

In the last policy meeting in March, the FED raised the basic interest rate from 0% to 0.25% for the first time since the COVID-19 pandemic broke out. However, some officials expect stronger and faster growth, in line with consumer inflation currently at 8.5%.

“The Fed’s goal is to use tools to ensure a balance between supply and demand, thereby reducing inflation and avoiding the risk of the economy falling into recession,” Powell emphasized.

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