Fed expects interest rate hikes to continue until at least next year

Fed expects interest rate hikes to continue until at least next year

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One of these risks could be an increase in inflation.

Fed officials expect inflation to reach 2.4% this year, above their estimate of 1.8% in December and slightly higher than the central bank’s target of around 2%.

The Fed also noted public health indicators, labor market conditions and financial market developments as potential risks in its statement.

The central bank left interest rates unchanged in the region of zero to 0.25%.

Stocks jumped shortly after the statement.

Investors are worried that the full reopening of the economy will lead to an increase in consumer price inflation, which in turn will force the Fed’s hand to raise interest rates as hoped. Treasury yields rose against the backdrop of this thesis and rose to a 13-month high of 1.67% on Wednesday.

According to the Fed’s consensus forecast – known as dot plot – the central bank does not expect any rate hikes in 2021, but four Fed officials predict higher interest rates in 2022.

But while inflation is the bulwark on Wall Street these days, higher consumer prices will come on the heels of a booming economy. Fed officials raised the U.S. gross domestic product, the broadest rating of economic activity, by 6.5%, more than the 4.2% forecast in December. Meanwhile, the year-on-year unemployment rate is expected to fall to 4.5%, compared to the previous estimate of 5%. As of February, the country’s unemployment rate stood at 6.2%.

This is an evolving story. It will be updated

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