The Federal Reserve signaled Wednesday that it will begin a series of interest-rate hikes in March, reversing pandemic-era policies that have fueled hiring and growth — and stock market gains — but also high inflation.
WASHINGTON — The Federal Reserve signaled Wednesday that it will begin a series of interest-rate hikes in March, reversing pandemic-era policies that have fueled hiring and growth — and stock market gains — but also stubbornly high inflation.
Economists said they were surprised by the likely timing and intensity of rate hikes sketched out by Powell, who said the economy is stronger now than in 2015, when the Fed began to raise rates slowly. “The Fed is signaling that they are going to be moving earlier, and maybe at a quicker pace, than we thought,” said Steve Rick, chief economist at CUNA Mutual Group.
The central bank’s latest policy statement follows dizzying gyrations in the stock market as investors have been gripped by fear and uncertainty over just how fast and far the Fed will go to reverse its low-rate policies, which have nurtured the economy and the markets for years.Asked about the stock market’s wild volatility, Powell stressed that the Fed’s “ultimate focus” is on the “real economy.
“The risk is for a faster pace of Fed tightening given the stickiness of inflation,” said Kathy Bostjancic, an economist at Oxford Economics, a consulting firm. For now, Powell said Fed policymakers are “of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so.”
The central bank faces a delicate and even risky balancing act. If the stock market is engulfed by more chaotic declines, economists say, the Fed might decide to delay some of its credit-tightening plans. Modest drops in share prices, though, won’t likely affect the Fed’s thinking.
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