Fed Ready to Raise?

Fed Ready to Raise? At the FOMC meeting on Wednesday, January 26th, the Federal Reserve kept the federal funds rate at the 0-0.25% range and suggested tapering should end in March, but also indicated that it may soon be time to raise rates. As the Consumer Price Index (CPI) rose to its highest reading in 40 years of 7% in December from the prior year, the Fed seems ready to hike rates in order to combat inflation. “With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” read the statement from the FOMC. It is believed that the Fed is likely to raise rates by 25bps at the next FOMC meeting in March, which would mark the first interest rate hike since December 2018. Fed Chairman Jerome Powell also stated, “I think there’s quite a bit of room to raise interest rates without threatening the labor market,” causing many to think that this tightening cycle may be more aggressive with numerous rate hikes to come over the course of 2022.