The Fed is likely to end this year on an aggressive note. The US financial regulator increased the key interest rate for the seventh time in a row. It is expected to continue monetary policy tightening in the upcoming year. Such a decision was quite expectable. During the year, the regulator has been conducting a transparent policy.
What is more, the key rate hike fully corresponds to the stance of the White House. The Fed’s officials are sure that the raise of the benchmark rate will have a positive effect on both the US and the whole world. A possible decline in the prices of oil, gas, and metals and later, of some other goods is one of the main advantages. Notably, commodity prices are denominated in dollars and the better part of international settlements on commodity markets are also conducted in the US currency. It means that commodity prices could become lower. The Fed raised the key interest rate by 50 basis points to 4.25%-4.5%. It is the seventh key rate hike since the beginning of the year. There is no doubt that the US regulator is an independent organization. However, this time, the Fed and the White House have chosen one stance. The latter fully supports the idea of monetary policy tightening.
”Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the statement of the Federal Open Market Committee, published on the website of the US central bank, reads.
