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Saturday, May 25, 2024

US Federal Reserve Signals 3 Interest Rate Hikes in 2022

https://ift.tt/2u9L75o at the U.S. central bank, the Federal Reserve, moved aggressively Wednesday to fight raging inflation in consumer prices for American shoppers and businesses. 

The policymakers announced they soon would end their stimulus to fight the economic damage from the coronavirus pandemic and signaled they could increase their benchmark interest rate three times next year. 

With consumer prices surging at an annualized 6.8% pace in November, the biggest jump in nearly four decades, the Fed said it will move faster to wind down its vast asset purchase program by March, rather than the initial goal of mid-2022, that it had used to boost the world’s biggest economy from the ravages of the pandemic. 

The Fed, in a statement after a two-day policy meeting in Washington, said the bond purchases could be ended faster “in light of inflation developments and the further improvement in the labor market.” 

For the moment, the central bank kept its benchmark interest rate near zero, a widely watched standard that influences the interest rates that consumers pay to borrow money to buy such big-ticket items as cars, and businesses pay to expand their operations or buy machinery. 

But the central bank said as it ends its purchase of billions of dollars of bonds, it could then hike its benchmark rate by a quarter of a percentage point three times in 2022, to keep inflation from getting out of hand without causing other problems in the American economy. 

“Economic developments and changes in the outlook warrant this evolution of monetary policy,” Fed Chair Jerome Powell told reporters during a post-meeting news conference. “The economy has been making rapid progress toward maximum employment.” 

While only a small percentage of consumers need to buy a new or used car, everyone needs to eat, and most American adults drive a vehicle of some sort. So, they have been especially hit in recent months by sharply rising food prices and increasing prices for gasoline, although gas prices are now receding again as world crude oil prices drop. 

One recent poll showed that 80% of Americans think prices at grocery stores especially are too high.

Powell presaged Wednesday’s policy shift two weeks ago when he said the central bank needed to act to keep inflation in check. 

“Almost all forecasters do expect that inflation will be coming down meaningfully in the second half of next year,” Powell said. “But we can’t act as though we’re sure of that. We’re not at all sure of that.” 

The end-of-meeting Fed statement said, “Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation.” 

But it said, “Risks to the economic outlook remain, including from new variants of the virus.” 


Author webdesk@voanews.com (Ken Bredemeier)
Source : VOA

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