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Fed sees 3 rate hikes next year as it pivots to combat inflation | Business and Economy News


The United States Federal Reserve said it is accelerating the tapering of its easy-money policies and now sees at least three interest rate hikes by the end of 2022.

Easy money is falling out of fashion.

The Federal Reserve wrapped up its final policy-setting meeting of the year by announcing it will accelerate with the withdrawal of some support it has given the economy during the pandemic as its priorities pivot from shoring up the jobs market to keeping a lid on blistering inflation.

At the end of its two-day meeting on Wednesday, the Fed said it is keeping its benchmark interest rate near zero – where it has been since the opening days of the pandemic – but is speeding up its tapering of bond purchases that have helped keep longer-term borrowing costs low.

The Fed also released fresh projections for at least three, quarter of a percentage point interest rate hikes by the end of next year.

While Wednesday’s accelerated unwinding and more aggressive forecast for rate hikes had been telegraphed by Fed chief Jerome Powell during his testimony before Congress earlier this month, it nevertheless marks a dramatic shift in the Fed’s priorities as disruptions from the pandemic spawn inflation feeding shortages of raw materials and workers.

Wholesale price inflation hit an all-time high last month, while consumer prices galloped ahead at their fastest pace in nearly 40 years.

Meanwhile, the labour market is experiencing a worker shortage as businesses struggle to fill a near-record number of job openings.  With so many jobs going begging, firms are offering better pay and benefits to lure scarce workers – driving average hourly wages 4.8 percent higher in November compared to the same period a year ago.

While the economic recovery is still very much on track, inflationary headwinds and supply chain snarls are an increasing source of concern.





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