Interest rates in the United States may drop soon

Interest rates in the United States may drop soon


Photo: ANP

US interest rates are expected to rise at a slower pace soon. This was stated in the minutes of the recent policy meeting of the Federal Reserve, the umbrella organization for central banks in the United States. The comments on the minutes came before a half-percentage-point hike in interest rates in December. It can also be read that policy makers estimate the chance of a recession in the United States at 50 percent.

In the past four meetings, the US interest rate has been raised by 0.75 percentage points over and over again. Higher interest rates are necessary to combat high inflation. The downside of large interest rate hikes is their impact on economic growth. Policy makers cite a range of risks such as “slower growth in real private domestic spending, a deterioration in the global outlook, and a tightening of financial conditions.”

The majority of policymakers said a slowdown in pace would be “appropriate” soon, according to documents from the November 1-2 meeting, released on Wednesday. At the same time, a number of policy makers concluded that the final level of interest rates to achieve the 2 percent inflation target would be higher than they had previously expected.

Interest rates in the United States now range between 3.75 and 4 percent. The last time interest rates rose so quickly was in the 1980s.

Since the November meeting, economic data has shown continued moderate growth in the United States. Some data also shows signs of declining inflation as labor demand remains strong. Last month, 261,000 jobs were added and the unemployment rate rose slightly to 3.7 percent, but it remains very low from a historical perspective.

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