Fed officials expect prices to rise three times next year in a hawkish pivot on inflation

Federal Reserve officials expect to raise interest rates three times next year in the wake of a major change from expectations three months ago as the US central bank is very aggressive in its handling. rising inflation.

The increase in hawkish interest rates was published along with a double-digit system in which the Fed removes or “disrupts” a major bond program that was established at the beginning of the epidemic. It will start in January to cut purchases by $ 30bn per month so that incentives can be removed a few months earlier than at first he waited.

It can set Fed by the end of March to stop increasing its investment size by the end of March and give it a chance to raise prices soon.

At the end of its two-day policy meeting Wednesday, the Federal Open Market Committee maintained its high interest rate at a rate of 0 to 0.25 percent, indicating support for a more proactive strategy.

When the so-called dot plot for everyone’s interest was finally changed in September, the main policy makers were evenly divisive on the prospect of “removal” of interest from the current zero near 2022.

Now, three increases are expected in 2022, with another three increases registered in 2023, followed by two in 2024.

“Economic instability and the importance of the epidemic and economic restructuring have continued to rise in inflation,” Jay Powell, chairman of the Fed, told a news conference following a statement from the central bank.

“These problems have become bigger and more lasting than we expected, exacerbated by the virus. As a result, inflation is more than 2 percent of our long-term performance and we will probably continue to do well until next year.”

The sudden change From the Fed following strong economic data indicating that the labor market is recovering well and that inflation is growing and at a steady risk.

Powell set it foundation due to the move to congressional meetings a few weeks ago, the legal abolition of the use of the term “transitory” to describe rising inflation shows that fixed prices are essential for long-term economic growth.

The Fed said that imbalances in metabolism and demand had contributed to the “rise in inflation” and agreed that inflation attempts to raise it had been met.

The Fed has previously stated that it will keep interest rates close to zero until it finds inflation rates of about 2 percent for long-term and substantial employment. The Fed has not determined the number of employees, however recent decline in the unemployment rate up to 4.2 percent indicates that progress has been made.

The Fed on Wednesday reversed its monetary policy stance, which raises inflation – which is at 4.1 percent, and has not reached a peak – lowering the unemployment rate.

The median analogy with Fed officials now predicts that inflation will rise to 4.4 percent this year before declining to 2.7 percent in 2022, and the unemployment rate will end in 2021 at 4.3 percent and next year will reach 3.5 percent.

Fed officials have downplayed their economic growth forecast, but still expect better growth this year and next. The US Economy expected to grow 5.5 percent in 2021, compared with 5.9 percent in September, and another 4 percent in 2022.

Fed Fed reports that new strains of coronavirus are at risk of economic collapse. Powell has previously warned that Omicron has “risks” to employment and economic activity and could boost inflation by exacerbating domestic crises.

The Fed’s change came again through the financial markets, as investors noted that the central bank was keen to bring about a rise in inflation. Inflation market rates over the next five years dropped sharply from October.

Advertisers sold huge US debt following the Fed’s decision, sending yields for the two-year economy up 0.06 percent to 0.71%. This set a dramatic decline for the first 21 months earlier this month.

Old 10-year-old records weakened, albeit slowly. Yields rose by 0.02 percent to 1.46 percent.

US stocks hit but were up sharply, while the blue S&P 500 was up 0.3%. tech-heavy Nasdaq Composite eliminated a 1.2 percent loss to sell slightly.

Additional reports by Eric Platt in New York