The Federal Reserve, signaling its inflation target has been met, on Wednesday said it would end its pandemic-era bond purchases in March, paving the way for three quarter-percentage-point interest rate increases by the end of 2022.
In new economic projections released following the end of a two-day 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%.
As a result, 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.
The 10-year U.S. Treasury note yield rose to 1.4616%, and the 2-year yield rose to 0.6994%; The 2s/10s yield curve flattened to 75.50 basis points. The dollar index added to gains and was 0.2% firmer.”I think it is a little aggressive… my expectation has always been that we are probably going to get one or two (hikes) and the first one probably does not happen ’til mid year,”
“It cements the fact that they recognize that inflation is not transitory. It gets the Fed in line with where everybody else has already been.”
