The Fed is increasingly clear about softer interest rate increases

The Fed is increasingly clear about softer interest rate increases


Photo: ANP

It is increasingly likely that the Federal Reserve will reduce the pace of interest rate hikes. In a speech, Chairman Jerome Powell said again that the Fed is likely to raise interest rates in fewer steps from December onwards than it did with recent interest rate decisions.

Central banks around the world are raising interest rates to prevent prices from continuing to rise as sharply as they are now. If borrowing becomes more expensive, there is less money circulating in the economy, which leads to lower prices, or so the idea is.

In the United States, the key interest rate has risen from a level around 0 percent in March to a range between 3.75 percent and 4 percent now. Powell warned again that interest rates are likely to continue rising for longer than expected in September.

Economists expect a recession, in part as a result of higher interest rates. But Powell said in his speech to the Brookings Institution think tank that there is still a good chance that the world’s largest economy can take a soft landing.

The US economy grew only slightly in November, the Federal Reserve wrote in its monthly report. The companies in the study, known as the Beige Book, report that they are held back by high inflation and higher interest rates, which make loans more expensive to obtain.

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