Because of interest rate increases, the US interest rate now lies between 5.25 to 5.50 percent. This is the highest level since 2001. By making it more expensive to borrow money, the Fed is slowing demand in the economy, and this should ensure that prices do not rise as quickly. Inflation has now fallen significantly, but remained steady at 3.7% in September.
The world’s largest economy also appears to be bearing higher borrowing costs better than expected. For example, the US economy grew much faster in the third quarter than in the previous three months. This is mainly due to continued strong spending by US households. However, Americans’ savings began to slowly run out, and mortgage interest rates rose sharply. Therefore, economists are taking into account the slowdown in growth in the current quarter.
During a speech in New York earlier this month, Federal Reserve Chairman Jerome Powell also pointed to rising risks to the economy due to escalating geopolitical tensions in the world. Although the economic consequences of tensions in the Middle East remain unclear, Powell stated that the Fed will continue cautiously with its monetary policy. However, according to the central bank chief, inflation is still too high and the Fed could raise interest rates further later this year. The Fed is scheduled to hold its last interest rate meeting of the year in December.
