US interest rates – Jerome Powell breathes new life into the US economy – News

Federal Reserve Chairman Jerome Powell is not a man of insinuations. As long as inflation is above two percent, the key interest rate will be increased. He says so at every opportunity. And that’s exactly what he’s done at every session for the past 12 months. Just not today. Why not? US inflation is still miles away from normality.

Why is the Fed suspending another rate hike? In fact, US inflation is still twice as high as desired. In recent weeks, however, US monetary authorities have repeatedly indicated that they may want to suspend a further increase in key interest rates. On the one hand, because US inflation is falling relatively quickly and significantly. On the other hand, they want to relieve the US economy, also because of the shocking US regional bank crisis in recent months. A “soft landing” instead of stalling the economy as the goal.

Is this the turnaround – will US interest rates fall again? It is probably too early for a change in strategy or for an end to the US interest rate hikes. US inflation is still well above the 2 percent target set by the Fed. This has mainly to do with the tight housing market and the robust job market. Wages continue to rise – by more than six percent in May. The unemployment rate remains low and the general wage level is high. Consumers continue to pay ever higher prices for goods and services, the price increases have only slowed down. The markets are therefore assuming that the next rate hike will come as early as July.

What does the Fed’s decision mean for interest rates in Euroland? In contrast to the US, inflation in the EU remains high. Inflation has remained stubborn despite continuous interest rate increases over the past year. Within a year, it fell by two percentage points and is currently staying at just over six percent. Nevertheless, the positive effects of the interest rate hikes by the European Central Bank are visible. In the past month, inflation in the euro area fell by a very significant percentage point. That is as much as in the past eleven months combined. Despite the glimmer of hope, it is too early to give the all-clear. Experts assume that the European Central Bank will raise the key interest rate again in mid-July.

Will Switzerland also suspend the rate hike? The Swiss National Bank will decide on another rate hike next week. Even if the Swiss currency watchdogs make their decisions independently, they will hardly ignore the decisions of the Fed and the ECB. What is more important, however, is that the goal of the Swiss National Bank, which has been stated several times, is to achieve an inflation rate of two percent. In May, inflation was 2.2 percent, well above that. Experts therefore assume that the SNB will raise the key interest rate in Switzerland by a further 0.25 points to 1.75 percent, even if inflation in Switzerland is comparatively low.