Friday, February 3

The Fed confirms that it will raise interest rates “soon”


The Fed has confirmed this Wednesday that it will probably raise interest rates in the U.S in March and reaffirmed his plans to end his bond purchases that month before beginning a significant reduction in his asset holdings.

The combined measures will complete a pivot away from the loose monetary policy that has defined the pandemic era and toward a more urgent fight against inflation.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said the Federal Open Market Committee of the US central bank, which sets the rates, in a policy statement.

The Federal Reserve also said FOMC members had agreed to a set of principles to “significantly reduce” the size of its asset holdings by limiting the amount of principal in maturing bonds that it will reinvest each month. This plan would start after the interest rate hike, the Fed said, without setting a specific date yet.

The Fed is supported by good employment figures

The Fed cited “strong” recent employment figures, even as the outbreak of the omicron variant of the coronavirus pushed the number of daily cases to record levels, and said it continued to hope that improvements in global supply chains would improve inflation.

In the weeks since the Fed’s December 14-15 monetary policy meeting, other risks have emerged, including Western fears of a possible Russian invasion of Ukraine and investors selling stocks.

But that did not detract from the urgency for the Fed to lean on inflation that has reached multi-decade highs.

“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” the Fed said.



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