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Economic Buzz: Federal Reserve Signals Rate Hike In March

Economic Buzz: Federal Reserve Signals Rate Hike In March

January 27, 2022 8:45 IST | capital market

The Federal Reserve on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation. Citing elevated inflation and a strong labor market, the Federal Reserve indicated Wednesday that it plans to begin raising interest rates soon. The Fed left interest rates unchanged at near-zero levels as widely expected but said the Federal Open Market Committee expects it will soon be appropriate to raise the target range for the federal funds rate. In an effort to combat the economic impact of the coronavirus pandemic, the Fed has left interest rates at zero to 0.25 percent since March of 2020. Subsequent interest rate increases and an eventual reduction in the Feds asset holdings would follow as needed, Powell said, while officials monitor how quickly inflation falls from current multi-decade highs back to the central banks 2% target. Powell was explicit that with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the U.S. economy during the coronavirus pandemic.

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