The US federal reserve has approved its first interest rate hike since more than three years and the fed approved a 0.25% point rate hike and also indicated rate hikes at each of the remaining six meetings in 2022.
Federal Reserve raising interest rates to a new range of 0.25% to 0.5% up a quarter on the range. The Federal Reserve saying it anticipates ongoing increases to the federal reserve funds rate. It expects the to do balance sheet reduction quote at a coming meeting not specified what meeting but specified that it is at a quote coming meeting the fed saying is prepared to adjust rates as needed relative to risks in the economy.
Further hikes forecast for 2023 and 2024 for both years that would bring the funds rate up to 2.8%. So the key right there is that the median fed official right now is expecting to raise the funds rate above the neutral rate which is 2.4 percent in the summary of economic projections. The fed also of course hiking the 2022 inflation outlook the median forecast now at 4.3% that is plus 1.7% points.
Further it says, inflation remains elevated and says supply and demand imbalances along with a variety of other factors are causing it. Ukraine invasion they say is causing human and economic hardship implications of the invasion for the US economy are quote highly uncertain. However it is likely to create upward pressure on inflation.
One more note here on the economy they say indicators of the economy have begun to strengthen and job gains have been strong. So good on those two scores but i think you have to
US Federal Reserve chairman Jerome Powell said at the Federal Reserve, we are strongly committed to achieving the monetary policy goals that congress has given us maximum employment and price stability. Today in support of these goals the FOMC raised its policy interest rate by one quarter percentage point. The economy is very strong and against the backdrop of an extremely tight labor market and high inflation. The committee anticipates that ongoing increases in the target range for the federal funds rate will be appropriate.
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In addition we expect to begin reducing the size of our balance sheet at a coming meeting. We of course want to achieve price stability with a strong labor market but we do understand also that really you can’t have maximum employment for any sustained period without price stability, so we need to focus on price stability in particularly because the labor market is so strong and the economy is so strong.
Additionally higher energy prices are driving up overall inflation. The surge in prices of crude oil and other commodities that resulted from Russia’s invasion of Ukraine will put additional upward pressure on near-term inflation. Here at home inflation is likely to take longer to return to our price stability goal than previously expected.