The Federal Reserve on Wednesday signaled it could “soon” raise interest rates for the first time in three years, paving the way for a March liftoff as policymakers seek to keep prices under control and combat the hottest inflation in nearly four decades.
Although central bank officials have left rates unchanged since March 2020, they indicated broad support this week during a two-day, policy-setting meeting to begin aggressively normalizing policy, including raising rates amid growing concern over the rapid increase in consumer prices.
“With inflation well above 2% and a strong labor market, the committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Fed said in its post-meeting statement. The central bank’s next meeting is scheduled for March 15-16.
The Fed already began slowing its bond purchases last year and is on track to conclude the program in early March, allowing policymakers to begin hiking interest rates and reducing a $9 trillion balance sheet. It is unclear when the central bank will begin shrinking its bond holdings, although officials said in the statement that they would start “in a predictable manner” primarily by adjusting how much they will reinvest as their bond holdings expire.
