The Federal Open Market Committee raised the Federal Reserve’s announced federal funds rate by three-quarters of a percent, to the 2.25-2.5% range, and declared more hikes are coming, blaming all of it on Russia. “Russia’s war against Ukraine is causing tremendous human and economic hardship,” the FOMC’s brief statement said. “The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity…. The Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.” (https://www.federalreserve.gov/newsevents/pressreleases/monetary20220727a.htm)
Federal Reserve Chair Jerome Powell in his following press conference added the forecast that the funds rate will be 3.25-3.5% by the end of 2022 ("Another large increase in September could be appropriate"), and will end up in the range of 3.75-4% in 2023. This is all hand-waving, as Powell also qualified it; what he meant to emphasize is that the Fed is prepared to knock down economic activity and employment to achieve “price stability.” Powell said the FOMC poses to itself the question, “Are we seeing the slowdown in economic activity that we think we need?”
These words are hammer-blows to developing-nation economies losing the ability to import what their populations need due to simultaneous runaway inflation and sinking currencies.
