Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Prepare for liftoff: Fed signals March interest rate hike

Prepare for liftoff: Fed signals March interest rate hike

The US Federal Reserve left interest rates unchanged, but Powell said the Fed is ‘of a mind’ to raise them in March.

The steward of the United States economy, the Federal Reserve, left interest rates unchanged at the end of its two-day policy-setting meeting on Wednesday, but it did prepare the ground for its first pandemic interest rate hike.

During his post-meeting press conference, Federal Reserve Chair Jerome Powell told reporters that the Fed’s policy-setting committee will likely raise interest rates when it meets in March, a move many expect.

“I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so,” said Powell.

US stock markets have been whipsawed in recent days by investor concerns over the Fed’s looming liftoff.

No one really expected the Federal Reserve to start hiking interest rates on Wednesday. What’s been roiling markets of late are concerns over just how hawkish the Fed will become.

During his press conference, Powell unfurled his hawkish wings, telling reporters, “I think there’s quite a bit of room to raise interest rates without threatening the labour market.”

The major US stock market indexes, which had been positive ahead of the meeting, turned negative following that remark.

The Fed slashed interest rates to near zero in the opening days of the coronavirus pandemic in 2020, and unleashed a slew of extraordinary measures to nurture the economy through the unprecedented disruptions created by lockdown that threw 22 million Americans out of work.

But the economy – and the jobs market – have been recovering strongly.

“The labour market has made remarkable progress and by many measures is very strong,” said Powell. “Job gains have been solid in recent months, averaging 365,000 per month over the past three months.”

Disruptions do still exist, but now it is supply-chain snarls and shortages of workers and raw materials that are raising costs for businesses and causing problems.

Businesses are increasingly passing on at least a portion of those higher costs to consumers, whose spending drives some two-thirds of US economic growth.

Inflation, especially for essentials like food, fuel and rent, is also hardest on low-income households, because it eats up a larger share of their financial resources.

In December, after the US central bank started pivoting monetary policy away from job-boosting cheap money and towards reining in inflation, it signalled it would raise interest rates at least three times this year.

But inflation is running at its hottest in nearly 40 years. And while the US created a disappointing 199,000 jobs in December, it wasn’t because not enough businesses are hiring. Jobs creation is suffering from too many businesses chasing too few available workers.

In fact, workers feel so confident about their job prospects that they are saying “I quit” in record numbers, while businesses have been offering better pay and benefits to lure scarce job seekers.

“Employers are having difficulties filling job openings and wages are rising at their fastest pace in many years,” said Powell.

That has had led some Wall Street economists – notably over at Goldman Sachs – to predict that there could be four rate hikes in the cards this year, not three.

Powell also addressed the disruptions caused by the Omicron variant of COVID-19, which has led to a wave of workers calling in sick and harmed activity in virus-sensitive sectors.

The Fed chief said that while he expects Omicron will weigh on growth this quarter, “if the wave passes quickly, the economic effects should as well and we would see a return to strong growth.”

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
×