Inflation accelerates the increase in interest rates

Posted on March 22, 2022 In the United States, the FED carried out last week the long-awaited first rate hike of 25 basis points in what will be a sequence of consecutive hikes with the aim of coping with inflationary pressure. Powell showed his confidence in the strength of the US economy to be able to gradually accommodate monetary policy without much shock. Some estimates see rates reaching 2.8% in 2023 and 2024, above the neutral rate of 2.4% and 2.5%. In addition, Powell did not rule out the possibility of more aggressive hikes (50 basis points) if inflationary pressure accelerated. In Asia, the Bank of Japan kept its accommodative monetary policy unchanged and interest rates at -0.1% due to the fact that inflation remains weak and below the target, in addition to the uncertainty about the possible consequences in the Japanese economy of the war in Ukraine. In Europe, Christine Lagarde affirmed that the European Central Bank has the capacity and willingness to design and implement new instruments with the aim of ensuring the transmission of monetary policy as progress is made towards normalization to combat the high level of inflation, the which seems to depend on the evolution of the conflict and the impact on the economy. For his part, Vice President Luis De Guindos said that he does not see stagflation given that in the scenarios they contemplate, even in the “severe” one, some positive growth is estimated and that it is most likely that we will enter a period of higher inflation than Before the war. Asked about the effects of a spiral of wages and prices, he says that the institution remains vigilant: “If we continue to underestimate inflation, we will respond. All options are on the table. The effects of the second round and a potential de-anchoring of medium-term inflation expectations will be the deciding factors. If we see them, we will act.” INFORMATIONTitleInflation accelerates the increase in interest ratesDescriptionIn the United States, the FED carried out last week the long-awaited first rate hike of 25 basis points in what will be a sequence of consecutive hikes with the aim of coping with inflationary pressure . Author GLOBALCAJA

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