The Fed Will Raise Rates in March
The Federal Reserve will begin a series of interest-rate hikes in March to fight inflation.
According to the Associated Press, Chair Jerome Powell said at a news conference that inflation has gotten “slightly worse” since the Fed last met in December. He said raising the Fed’s benchmark rate, which has been pegged at zero since March 2020, will help prevent high prices from becoming entrenched.
Seeking to calm fears that higher rates might hurt the economy, Powell said the central bank can manage the process in a way that prolongs growth and keeps unemployment low. “I think there is quite a bit of room to raise interest rates without threatening the labor market,” he said.
Economists said they were surprised by the likely timing and intensity of rate hikes sketched out by Powell, who said the economy is stronger now than in 2015, when the Fed began to raise rates slowly. “The Fed is signaling that they are going to be moving earlier, and maybe at a quicker pace, than we thought,” said Steve Rick, chief economist at CUNA Mutual Group.
The Fed’s rate hikes will make it more expensive, over time, to borrow for a home, car or business. The Fed’s intent is to temper economic growth and cool off inflation, which is at a 40-year high and eating into Americans’ wage gains and household budgets.
“The best thing we can do to support continued labor market gains,” Powell said, “is to promote a long expansion, and that will require price stability.”
The central bank’s latest policy statement follows dizzying gyrations in the stock market as investors have been gripped by fear and uncertainty over just how fast and far the Fed will go to reverse its low-rate policies, which have nurtured the economy and the markets for years.
The broad S&P 500 index fell nearly 10% this month and fell slightly Wednesday.
https://apnews.com/article/federal-reserve-interest-rates-inflation-1dd9283e46162b3c0d29a2c55a2934d1?utm_campaign=mb&utm_medium=newsletter&utm_source=morning_brew
