US Federal Reserve to start hiking interest rates in March in bid to tame rising inflation
The Federal Reserve has signalled it will start raising interest rates in March to fight red-hot inflation.
Pointing to strong jobs data and a jump in the cost of living, the US central bank said it ‘will soon be appropriate’ to end the era of ultra-low borrowing costs.
Its benchmark interest rate is in the range of 0 per cent-0.25 per cent. Although the Fed did not release fresh forecasts for how many times it would raise rates, traders expect ‘several’ moves in 2022.
Change of tack: The US Federal Reserve (pictured) said it ‘will soon be appropriate’ to end the era of ultra-low borrowing costs
In December, officials pencilled in three rises. US households are now battling the hottest inflation in nearly 40 years. At 7 per cent in December it was the highest pace of price increases since 1982.
Central banks usually hike rates when inflation overheats, to encourage saving rather than spending. In theory, this should bring down prices.
But officials have been reluctant to do so, worried a rise could halt economic recovery from Covid.
Experts also fear an increase could deter businesses from hiring. But US unemployment is down to 3.9 per cent, suggesting the economy could withstand a rise.
The Bank of England was the first major central bank to hike rates in the wake of the pandemic – from 0.1 per cent to 0.25 per cent in December.