Federal Reserve points to interest rate hike coming in March
Facing both turbulent financial markets and raging inflation, the Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years.
In a move that came as little surprise, the Fed's policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first increase since December 2018.
The statement comes in response to inflation running at its hottest level in nearly 40 years. Though the move toward less accommodative policy has been well-telegraphed over the past several weeks, markets in recent days have been remarkably choppy as investors worried that the Fed might tighten policy even more than expected.
The post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting. The statement was adopted without dissent.
«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,» the statement said. The Fed does not meet in February.
In addition, the committee noted the central bank's monthly bond-buying will proceed at just $30 billion in February, indicating that program could end in March as well at the same time that rates increase.
There were no specific indications Wednesday when the Fed might start to reduce bond holdings that have bloated its balance sheet to nearly $9 trillion.
However, the committee released a statement outlining «principles for reducing the size of the balance sheet.»
That policy sheet noted that the benchmark funds rate is «primary
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