The Fed sees three rate hikes in 2022 as the battle for inflation begins

Washington: The Federal ReserveIndicating that its inflation target has been met, it said on Wednesday that it would end its epidemic-era bond purchases in March and pave the way for a three-quarter-percent-point interest rate hike by the end of 2022 as it deviates from the policies formulated in 2022. Will go out. The onset of a health crisis.
In new economic estimates released after the end of the two-day policy meeting, officials predicted that inflation would rise to 2.6% next year, compared to the September estimate of 2.2%, and that the unemployment rate would fall to 3.5% – if not more than full employment nearby.
As a result, central officials predicted that the Fed’s benchmark interest rate would need to rise overnight from its current near zero level to reach 0.90% by the end of 2022. It will start a hiking cycle that will see the Fed raise policy rates. Coming closer to 1.6% in 2023 and 2.1% in 2024 – but never exceeding that level will limit economic activity.
In outline, it is the “soft landing” that Fed officials hope will gradually ease inflation in the coming years while unemployment will remain low in a growing economy.
The timing of the first hike this year, the central bank said, will now only stay on the path to the job market which is expected to continue to improve in the coming months.
Any reference to inflation was dropped from the policy statement as “temporary”, instead the Fed acknowledged that the price increase had exceeded its 2% target “for some time”.
Annual inflation has been more than double the Fed’s target in recent months.
To open the door to further rate hikes, the Fed announced that it was doubling the pace of its bond-buying “tapper”, and was putting it on track to finish the program, which began at દ 120 billion per month in early March.
US stocks rose modestly after the release of statements and forecasts, while yields on Treasury securities rose. The dollar strengthened against a basket of major trading partners’ currencies.
Traders of interest rate futures were setting the first increase in May and two more by the end of 2022.
Although the Fed has raised contingency rates for some further improvement in the job market, new policy projections have left little doubt that borrowing costs will rise next year, without a major economic shock. All 18 policymakers have indicated that at least one rate increase would be appropriate before the end of 2022.
All told, the new estimates and policy statement began to pin the central bank’s plan to “normalize” monetary policy after nearly two years of extraordinary efforts to nurse the economy from the effects of the epidemic.
It is still ongoing, the Fed acknowledged, adding to the uncertainty about the route of the new Omicron coronavirus variant economy.
But the Fed, at this point, said economic growth is still expected to be 4.0% next year, higher than the 3.8% projected in September and more than double the trend in the economy.
Fed Chair Jerome Powell A news conference is scheduled to be held at 2.30 pm EST (1930 GMT) to elaborate on the new policy statement and answer questions about the central bank’s economic outlook.


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