The central bank of the United States has signalled it could raise interest rates three times next year.
In an abrupt policy shift, the Federal Reserve has said will quicken the pace at which it withdraws support for the post-pandemic US economy as inflation surges.
It announced on Wednesday it will shrink its monthly bond purchases at twice the pace previously announced, and likely end them altogether in March.
The bond purchases were intended to hold down long-term rates in a bid to boost the economy, but are no longer needed with unemployment falling and inflation at a near-40-year high.
The Fed’s new forecast that it will raise its benchmark short-term rate three times next year is up from the one rate hike it had projected in September.
The key rate, now pinned near zero, influences many consumer and business loans whose rates would likely also rise.
The policy change the Fed announced in a statement after its latest meeting had been signalled in testimony chair Jerome Powell gave to Congress two weeks ago.
COVID-19: US coronavirus deaths top 800,000, with more than 25% coming after vaccines became available
Larry Nassar: Abuse victims of disgraced gymnastics doctor reach $380m settlement after lengthy legal battle
US tornadoes: Before and after satellite pictures show extent of destruction
It marked Powell’s acknowledgment that with inflation pressures rising, the central bank needed to begin tightening credit for consumers and businesses faster than had been thought a few weeks ago.
The Federal Reserve is shifting its attention away from reducing unemployment – which has fallen quickly to a healthy 4.2%, down from 4.8% – and toward reining in higher prices.
It comes as consumer prices soared 6.8% in November compared with a year earlier, the government said last week, and is at the fastest pace in nearly four decades.
Leave a Reply