Central Bank Expected To Raise Interest Rates Wednesday

Central Bank Expected To Raise Interest Rates Wednesday

Harry Wilmerding on March 14, 2022

The Federal Reserve is expected to raise interest rates after its meeting Wednesday to combat the country’s soaring inflation, Axios reported.

The central bank is believed to raise its target fed funds rate by a quarter percentage point from zero after the end of the two-day meeting ending Wednesday, Axios reported. The Fed’s decision will outline the bank’s monetary policy for the near future and determine whether the U.S. economy enters a recession or continues surging price hikes, according to Axios.

Inflation has soared to nearly 8% year-over-year as of February while unemployment stayed below 4%, indicating that the Fed has been behind the curve in its effort to address sustained inflation, Axios reported. Federal Reserve Chairman Jerome Powell is now reportedly tasked with fixing a delicate economy without crashing it despite a war in Ukraine and renewed COVID-19 lockdowns in China.

Fed leaders will update its rate forecast, according to Axios, a move which will tighten monetary policy by increasing interest rates. The Fed reportedly believes a target inflation rate of 2.5% would neither stimulate the economy nor slow it down. It would take around 10 quarter-point rate hikes in 2022 to reach the reported target of 2.5%.

“Powell can’t really afford to be dovish at this point, it would be inconsistent with what sound policy is and where policy needs to be heading,” Derek Tang, an economist at Monetary Policy Analytics, told Bloomberg.

Forecasters project around six rate hikes in 2022, with more coming in 2023, Axios reported.