Fed: fighting inflation to control prices
High prices are now evident to everyone, including the Americans. The surge in the cost of all goods, those of primary necessity in particular, was first stimulated by COVID-19, with strong expectations of recovery, and then by the war, with less promising prospects. This surge alarms the governments of the European Union member countries, standing on the side-lines, waiting for the Fed to intervene.
In fact, the crucial meeting of the Federal Open Market Committee, the institution that manages monetary policy on behalf of the Federal Reserve, kicked off on Tuesday. Confirming expectations, Jerome Powell was forced to impose an interest rate hike of 75 base points, from 1,50 to -1,75.
The increase is the highest since 1994 and the decision forms a true declaration of war on inflation. The rise in prices is unsustainable for citizens and has reached 8.6%, a record that has not been seen since the 1980s. A food crisis is around the corner and in the poorest countries, such as Sudan, it has already become a reality, with the FAO announcing that it will suspend aid for 1.7 million people due to the crisis in the Ukraine.
But not only Africa is suffering, albeit the impact there is stronger. Westerners are having to deal withhigh prices too, with gasoline and food being the most affected. US President Biden himself is very worried about the grip of a possible recession that can already be glimpsed in economists’forecasts.
And the Fed is the only body that can avert it. The widespread belief among analystsand rulers is that the economy is able to amortize a sharp change in interest rates in orderto bring down enemy number one: inflation.