The Fed is about to raise interest rates
“With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Fed statement said.
In the press conference that followed, Fed Chairman Jerome Powell confirmed that March was probably the right time to anticipate.
“I would say the committee is of the view that the federal funds rate should be increased at the March meeting, assuming the conditions are appropriate to do so,” he told reporters.
Inflation continued to climb until the end of 2021 and economists expect to see the peak of this cycle in the first months of this year.
“Like most forecasters, we continue to expect inflation to decline over the year,” Fed Chairman Jerome Powell said at Wednesday’s press conference. Less pressure on struggling global supply chains and less stimulus from Washington should help.
But there’s not much sense in trying to guess exactly when those rate hikes will happen in 2022, or how big they will be. Powell told reporters on Wednesday. When asked if a half-percentage-point raise would be possible, Powell declined to commit one way or the other.
“It is not possible to predict with much confidence exactly which trajectory for our policy rate is going to turn out to be appropriate,” he said, stressing that the central bank needed to be flexible and adaptable in its approach.
The bank will continue to scale back its monthly asset purchases and end them in early March, it said on Wednesday.
“We expect the FOMC to announce at the September policy meeting that it will begin to reduce its balance sheet in the fourth quarter,” Wells Fargo chief economist Jay Bryson said.