According to the minutes of the Federal Reserve’s (Fed) September meeting, policymakers were surprised at the rising rate prices and indicated they expect higher interest rates to prevail until prices come down.
Participants felt the need to maintain a restrictive stance for as long as necessary, with some members of the rate-setting committee stressing that historical experience showed the danger of prematurely ending periods of tight monetary policy designed to bring down inflation.
During the meeting, US central bankers agreed to raise the benchmark interest lending rate by 75 basis points for the third time in a row, lifting it to a target range of three per cent to 3.25 per cent as they try to reduce persistent inflation pressures.
In the meantime, the International Monetary Fund (IMF) lowered its global growth expectations for 2023 while warning that the global economy is set to face further headwinds in the coming year.
The IMF anticipates global expansion to slow to 2.7 per cent in 2023, 0.2 percentage point below its July forecast, while anticipating it will feel like a recession for millions around the world.
“Risks to the outlook remain unusually large and point downwards,” the report said, while enumerating a broad list of threats from energy and food shocks to China’s property crisis spreading across borders that could be detrimental on financial institutions.
Finally, new inflation data released in the US on Thursday showed that consumer prices rose by more than expected in September, heralding more bad news for the Fed as it struggles to bring the multi-decade high inflation rate back under control.
The Labour Department said that its consumer price index rose by 0.4 per cent in September after rising by 0.1 per cent in August. Economists had expected monthly consumer prices to edge up by 0.2 per cent.
Despite the continued moderation in supply chains and the fall in oil prices from third quarter highs, inflation remains stubbornly above the Fed’s two per cent target.
This article is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap.371 of the Laws of Malta) and the Investment Services Act (Cap.370 of the Laws of Malta).