Washington: federal Reserve, indicating meeting its inflation target, said on Wednesday it would end its pandemic-era bond purchases in March and pave the way for a three-quarter-percentage-point interest rate hike by the end of 2022 as It exits from enacted policies. Beginning of the health crisis.
In new economic projections released after the end of the two-day policy meeting, officials predict inflation will hit 2.6% next year, compared to 2.2% projected in September, and the unemployment rate will fall to 3.5% — near if. No more than full employment.
As a result, median officials estimated that the Fed’s benchmark overnight interest rate would need to rise to 0.90% from its current near-zero level by the end of 2022. This would start a hiking cycle that would see the Fed’s policy rate climb. It would consider economic activity restrictive – 1.6% in 2023 and 2.1% in 2024 – near but never exceeding levels.
This, in outline, is the “soft landing” of what Fed officials expect inflation to gradually ease in the coming years, while unemployment remains low in a growing economy.
The timing of the first hike this year, the central bank said, will now depend entirely on the path of the job market which is expected to continue to improve in the coming months.
Removed from the policy statement was any reference to inflation as “transient”, with the Fed instead acknowledging that price increases “for some time” exceeded its 2% target.
Annual inflation has been running at more than double the Fed’s target in recent months.
To open the doors to rate hikes, the Fed announced it was doubling the pace of its bond-buying “taper”, putting it on track to end the program, initially at $120 per month by March. Billion started.
US stocks rose marginally after the release of the statement and projections, while yields on Treasury securities rose. The dollar strengthened against a basket of currencies from major trading partners.
Traders in interest rate futures were making the first hike in May, and two more by the end of 2022.
Although the Fed contingently raised any rate hikes on some further improvement in the job market, the new policy projections left little doubt that borrowing costs would rise next year, not a major economic blow. All 18 policymakers indicated that at least a single rate hike before the end of 2022 would be appropriate.
All told, the new projections and policy statement begin to pin down the central bank’s plan to “normalize” monetary policy after nearly two years of extraordinary efforts to nurse the economy through the fallout of the pandemic.
This is still going on, the Fed acknowledged, adding to the uncertainty about the course of the economy with the new Omicron coronavirus pandemic.
But the Fed said at this point that economic growth is still expected to be 4.0% next year, up from the 3.8% projected in September and more than double the underlying trend of the economy.
fed chair Jerome Powell A news conference is scheduled to take place at 2.30 p.m. EST (1930 GMT) to elaborate on the new policy statement and answer questions about the central bank’s economic outlook.
In new economic projections released after the end of the two-day policy meeting, officials predict inflation will hit 2.6% next year, compared to 2.2% projected in September, and the unemployment rate will fall to 3.5% — near if. No more than full employment.
As a result, median officials estimated that the Fed’s benchmark overnight interest rate would need to rise to 0.90% from its current near-zero level by the end of 2022. This would start a hiking cycle that would see the Fed’s policy rate climb. It would consider economic activity restrictive – 1.6% in 2023 and 2.1% in 2024 – near but never exceeding levels.
This, in outline, is the “soft landing” of what Fed officials expect inflation to gradually ease in the coming years, while unemployment remains low in a growing economy.
The timing of the first hike this year, the central bank said, will now depend entirely on the path of the job market which is expected to continue to improve in the coming months.
Removed from the policy statement was any reference to inflation as “transient”, with the Fed instead acknowledging that price increases “for some time” exceeded its 2% target.
Annual inflation has been running at more than double the Fed’s target in recent months.
To open the doors to rate hikes, the Fed announced it was doubling the pace of its bond-buying “taper”, putting it on track to end the program, initially at $120 per month by March. Billion started.
US stocks rose marginally after the release of the statement and projections, while yields on Treasury securities rose. The dollar strengthened against a basket of currencies from major trading partners.
Traders in interest rate futures were making the first hike in May, and two more by the end of 2022.
Although the Fed contingently raised any rate hikes on some further improvement in the job market, the new policy projections left little doubt that borrowing costs would rise next year, not a major economic blow. All 18 policymakers indicated that at least a single rate hike before the end of 2022 would be appropriate.
All told, the new projections and policy statement begin to pin down the central bank’s plan to “normalize” monetary policy after nearly two years of extraordinary efforts to nurse the economy through the fallout of the pandemic.
This is still going on, the Fed acknowledged, adding to the uncertainty about the course of the economy with the new Omicron coronavirus pandemic.
But the Fed said at this point that economic growth is still expected to be 4.0% next year, up from the 3.8% projected in September and more than double the underlying trend of the economy.
fed chair Jerome Powell A news conference is scheduled to take place at 2.30 p.m. EST (1930 GMT) to elaborate on the new policy statement and answer questions about the central bank’s economic outlook.
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