The Federal Reserve will keep interest rates near zero, and it will begin its rate hike in mid-March, Federal Reserve Chairman Jerome Powell said Wednesday after the central bank’s two-day meeting.
The Fed will continue reducing its asset purchasing stimulus, buying $30 billion in February and indicating the program could end in March, Powell said Wednesday.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal fund rate,” the Fed’s board of governors said in a Wednesday press release.
Fed officials said they would keep rates near zero until inflation forecasts lowered to the bank’s 2% goal and until the labor market returns to levels in line with maximum employment.
Inflation has soared to a near four-decade high, with the Consumer Price Index (CPI) growing 7% as of December 2021 on a year-over-year basis. Meanwhile, the Producer Price Index (PPI), which measures inflation at the wholesale level, surged to 9.7% on a year-over-year basis in December, its highest level ever recorded.
Meanwhile, the U.S. economy added only 199,000 jobs in December, but unemployment dropped to 3.9% from November’s 4.2% figure. Roughly 6.5 million Americans remained out of work at the end of 2021 as the economy was still 3.5 million jobs short of its pre-pandemic level.
Concerns over the Fed’s decision regarding rate hikes have led to turbulent and volatile markets this week, with the S&P 500 falling 10% Monday and entering correction territory before snapping back up before the close of trading.
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