The Fed is expected to announce a more rapid reduction in its huge stimulus plan and raise its expectations for a rate hike next year, as it is Soaring inflation.
The U.S. Central Bank on Wednesday will double the rate at which it cuts or “shrinks” its bond purchase program, cutting $30 billion a month so that the stimulus program ends several months earlier than it was originally. Reserve November.
This will make Federal Reserve It is expected to stop increasing the size of the balance sheet before the end of March and have the ability to raise US interest rates soon.
According to new forecasts to be released on Wednesday after a two-day policy meeting, Fed officials are expected to express support for two interest rate hikes next year, which is more radical than a few months ago. There will be three to four adjustments in 2023, and another round of adjustments in 2024.
The last time the so-called personal interest rate forecast dot matrix was updated was in September. Divide equally The prospect of taking off from the current near-zero level in 2022.
This Sudden fulcrum A series of strong economic data indicate that the labor market is recovering, and there are more and more signs that inflation is not only expanding, but also that there are greater risks that become more entrenched.
Federal Reserve Chairman Jay Powell announced basic work Regarding this move at a congressional hearing a few weeks ago, the term “temporary” was formally removed when talking about inflation, and it implied that stable prices are essential for long-term economic expansion.
The Fed is expected to completely eliminate the term in its policy statement issued on Wednesday and revise its wording around the economic outlook.
Some economists believe that given that the core inflation rate is currently 4.1% and has not yet peaked, the Fed will acknowledge that the inflation threshold it seeks to reach before raising interest rates may have been reached.
The central bank has previously stated that it will keep interest rates close to zero until it achieves an average inflation rate of 2% and a maximum employment rate over a period of time.The Fed has not yet set a digital target for the latter target, but Recently dropped The unemployment rate rose to 4.2% to indicate progress towards this goal.
The economic forecast planned on Wednesday will also be adjusted, and Fed officials may revise their inflation forecast upwards and lower their unemployment rate estimates.
The median forecast for September shows that the core inflation indicator will stabilize at 3.7% this year, and then drop to 2.3% in 2022, while the unemployment rate will drop to 4.8% in 2021, and then fall further to 3.8% in the following year. point.
Policymakers also saw in September U.S. economy This year it will increase by 5.9% and then decline to 3.8% in 2022. Economists expect the figures for 2021 to decline slightly.
Powell may also respond more directly to the threat posed by the new Omicron variant, which has triggered a global alarm and prompted many governments around the world to re-implement lockdown measures.
The chairman of the Federal Reserve has previously warned that Omicron will bring “downside risks” to employment and economic activity, and that as supply chain disruptions intensify, inflation may increase.