Starting in mid-January, the Federal Reserve will double the pace of its monthly bond tapering program with it scheduled to end in March. The U.S. central bank also points to three quarter-point interest rate hikes in 2022 and three more in 2023.
In his press conference, Fed Chair Jerome Powell said any interest rate increase will be after the end of the bond purchase taper. While there is currently no decision when interest rates will be increased, Powell said it could come shortly after the bond buying program has ended. After today’s meeting, interest rate futures priced in the first hike in May and two more before end of 2022.
All 18 policymakers indicated at least a single rate increase would be appropriate before the end of 2022. Officials at the median projected the Fed’s benchmark overnight interest rate would need to rise from its current near-zero level to 0.90% by the end of 2022, with continued increases in 2023 to 1.6% and in 2024 to 2.1% required to pull inflation back to the central bank’s 2% target. But any eventual rate hikes would hinge solely on the path of the jobs market.
In new economic projections released following the end of a two-day monetary policy meeting, officials forecast that inflation would run at 2.6% next year, compared to the 2.2% projected as of September, and the unemployment rate would fall to 3.5%. The economic projections signal GDP of 5.5% this year (down from 5.9% in September) and falling to 4.0% in 2022 (up from the 3.8% projection in September).
Read more from Pro Farmer: Fed Takes More Aggressive Stance Toward Inflation
