“In the first quarter, economic activity grew at a moderate pace. Job growth has been robust in recent months and the unemployment rate has remained low. Inflation remains elevated,” the Federal release says.
Additionally, the Fed has rated the US banking system as reliable and stable. “The tightening of credit conditions for households and businesses is expected to put pressure on economic activity, employment and inflation. The magnitude of these effects remains uncertain,” the Fed said.
The Fed raises the rate band to bring inflation back to the long-term 2% target. Directly to the Fed, they are not promising to raise the range of rates at the next meeting (it will be June 14). In doing so, they state that “when determining the extent to which additional policy tightening may be appropriate to bring inflation down to 2% over time”, the regulator will take into account the cumulative tightening of monetary policy, the lag with which monetary policy affects economic activity and inflation, as well as economic and financial factors.
In March, according to the US Department of Labor, annual inflation (i.e. March 2023 to March 2022) in the country slowed to a two-year low of 5%. In February, annual inflation in the United States was 6%. At its peak, annual inflation was in June 2022 – 9.1% (this was a forty-year high).
The Fed began raising the base rate range at every meeting beginning in March 2022. Then that number was raised for the first time since December 2018. In 2020, the Fed, in response to the crisis caused by the pandemic of coronavirus, on the contrary unexpectedly and unforeseenly lowered the rate range to 0-0.25%. From this mark, the continued growth in rates began in the spring of last year.
An increase in the base interest rate band in the United States always means the strengthening of the US dollar against other world currencies. At the same time, due to the fact that due to the sanctions the Russian financial market is practically cut off from the world market, the rise in dollar rates will indirectly exert pressure on the ruble exchange rate: through commodity prices raw.
