With inflation set to stay high for some time, the U.S. central bank is expected to raise interest rates soon after ending its bond buying program in March, a board member said on Friday. administration of the Federal Reserve.
The Fed announced earlier this week that it would speed up the end of its stimulus package after inflation last month saw its biggest jump in nearly four decades, with price increases across a wide range of commodities. hitting American consumers and businesses.
Fed Governor Christopher Waller said the move announced on Wednesday gives policymakers an opportunity to react quickly with an increase in the benchmark lending rate, which he says “will be justified soon after the end of our asset purchases “in the spring.
When asked to be more specific on the timing, Waller said, âWe would like to put March on the table as a possible date to start raising (interest rates) if we need to. “
The Fed’s quarterly forecast for policymakers also released this week signaled the likelihood of three interest rate hikes next year, and most economists expect the first in May, as officials try to keep secret inflation. But opening the door to faster movement in March, at what would be the Fed’s second policy meeting of the year, was the “whole point” of the decision announced this week, Waller told the Forecasters Club. from New York.
Inflation “is alarming, persistent and has widened to affect more categories of goods and services, compared to the start of this year.”
He said he expects the economy to grow strongly over the next few months and quickly return to full employment, a key benchmark for the Fed before it raises rates to zero, where they have been at the start of the pandemic since March 2020.
However, “a big uncertainty about this outlook, of course, is the Omicron variant,” he warned.
The new variant could force further restrictions that could slow the economy, but also “exacerbate labor and asset shortages and add inflationary pressure.”
It will take a few months to see if inflation moderates as expected, he said.
Waller noted that the Fed has adapted quickly to the unprecedented nature of the global pandemic and its impact on the economy and financial system.
However, the crisis posed huge challenges for forecasters trying to predict the severity of the downturn and the speed of the recovery, including supply chain bottlenecks that have frustrated businesses and increased pressure on companies. price.
âLike others, I expected that [the] markets would adjust quickly and these issues would be resolved, âhe said.
âWe are learning that the long and complex supply chains that have made trade easier and lowered production costs in recent years are quite fragile and take longer to repair than I would have imagined.