Facing the accelerator inflation, which shows only minimal and weak signs of de-escalation, the US Federal Reserve yesterday chose to ignore recession risk warnings and embarked on a fourth consecutive 75 basis point hike in dollar interest rates. The latest move, the sixth consecutive increase in borrowing costs this year, raises Fed interest rates to 3.75% to 4%, the highest level since the 2008 global financial crisis. The restrictive monetary policy that the Federal Reserve has been pursuing since the 1980s. The shift is very fast, given that he only started it last March with the first increase from the near-zero level that dollar interest rates were then.

The Fed nevertheless explained that the growth in the cost of borrowing will continue, but hinted that this will happen at a softer pace, as in their respective statement they emphasized that from now on they will take into account the cumulative effect that has been increasing so far. In his related statement, he specifically emphasized that “in terms of the pace of next steps, the monetary policy committee will take into account the amount of interest rate hikes, the delay in which monetary policy affects economic activity and inflation, and economic and financial development.” “. However, he refrained from confirming that he intends to slow down the pace of new increases. It should be noted that the market is dominated by the assessment that in December the US Federal Bank will continue its next increase, but less aggressive and probably only by 50 bp. then by 5%. But given that despite six rate hikes this year, inflation has not stopped, many economists have repeatedly wondered when and how the Fed will be able to end this round of borrowing cost hikes.

The Fed clarified that the increase in borrowing costs will continue, but emphasized that from now on it will take into account the cumulative effect of the increase so far.

The aggressive reversal that has already taken place will make life even more difficult for Americans, as they face inflation of around 8.3% and will be forced to pay higher mortgage payments, financial analysts say. The same is, of course, true for US companies, as successive interest rate hikes will dramatically raise their debt service costs. It is also possible, as Fed Governor Jerome Powell acknowledged, to push the world’s largest economy into recession. “I wish it could be done in a painless way, but there is no such way,” Mr. Powell comments since September, repeatedly stressing that persistent and prolonged high inflation can cause much more serious economic problems than a recession.

After three other rate hikes of the same magnitude, mortgage rates are already at their highest levels in 20 years and are beginning to have a serious impact on the US housing market. Sales of new homes in September decreased by 10.9% compared to August and by 17.6% compared to the same period last year. The few signs of deflationary inflation are limited to a slowdown in wage growth in the third quarter of the year, when it slowed to 1.2% from 1.6% in the second quarter. At the same time, however, the US job market doesn’t seem to be slowing down, with the latest figures showing 1.9 job openings for every unemployed American.