August 8, 2022

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The Federal Reserve signaled a hawkish pivot amid skyrocketing inflation, with officials saying they may...

The Federal Reserve signaled a hawkish pivot amid skyrocketing inflation, with officials saying they may raise interest rates at least three times next year.  
The Fed said Wednesday it plans to end its pandemic-era bond purchases in March, paving the way for three potential interest rate increases of a quarter point each next year, raising them from their current levels near zero.
That’s a sharp about-face from September, when about half of Fed officials believed rate increases wouldn’t be necessary until 2023. The stimulus slowdown is coming “in light of inflation developments and the further improvement in the labor market,” the central bank led by Chairman Jerome Powell said.  
The move under Powell comes as the Fed faces increasing political pressure because of skyrocketing inflation.
Still, the Fed might not carry out its plans to tamp down inflation by raising rates: Its next moves will likely depend on the Omicron variant of the coronavirus, which has raised questions about the country’s ongoing economic recovery. 

The Federal Reserve predicts the Personal Consumption Expenditure inflation rate will drop to 3 percent in 2022.U.S. FEDERAL RESERVE
“The Omicron variant is a wild card for both Fed policy and the overall economy,” said Bankrate chief financial analyst Greg McBride. “Until there is greater clarity about transmissibility and possible economic fallout, the Fed has left themselves room to reverse course should it become necessary.”
Nonetheless, McBride said Wednesday’s Fed statement definitely had “a more hawkish tone” than previous statements.
The Federal Reserve estimates the unemployment rate will level off despite the actual statistic skyrocketing in 2021. U.S. FEDERAL RESERVE
The US Real GDP has declined since 2019, when Donald Trump was president.U.S. FEDERAL RESERVE
The Federal Reserve projects the federal funds rate will start increasing from 2022 to 2024.U.S. FEDERAL RESERVE
Following a morning of jitters, markets surged on the news. Although easy money has provided the juice that’s fed much of the stock market’s rise, investors seemed soothed that the Fed would step on the brakes when it comes to inflation that has surged to a 39-year high.
The Dow Jones Industrial Average closed up 383 points, or 1.08 percent, on the day, while the S&P 500 index jumped by more than 1.6 percent. 
Markets surged on the news Wednesday. Anadolu Agency via Getty Images
The Fed plans to hike interest rates next year.
In new economic projections released by the Fed on Wednesday following its two-day policy meeting, officials forecast that inflation would run at 2.6 percent in 2022, compared to the 2.2 percent projected as of September. They also predicted the unemployment rate would fall to 3.5 percent from the current 4.2 percent. 
The Fed said it had met its inflation mandate and added that any rate hikes in 2022 would hinge solely on the path of the job market. 
The move under Powell comes as the Fed faces increasing political pressure because of inflation.CQ-Roll Call, Inc via Getty Imag
“With inflation having exceeded 2 percent for some time, the Committee expects it will be appropriate to maintain” the near-zero interest rates until labor markets have returned to full employment, the Fed said in a statement.
The central bank is beginning to pin down how it plans to “normalize” monetary policy following nearly two years of extraordinary efforts to nurse the economy through the fallout of the pandemic.
With Post wires

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