Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

U.S. central bankers set sights on March rate hike

EconomyJan 12, 2022 08:16PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: San Francisco Federal Reserve President Mary Daly reacts at the Los Angeles World Affairs Council Town Hall, Los Angeles, California, U.S., October 15, 2019. REUTERS/Ann Saphir/File Photo

By Ann Saphir

(Reuters) - With inflation running at its highest in nearly 40 years, U.S. central bankers are coalescing around a plan to start tapping the brakes on economic growth as soon as March, with further monetary policy tightening likely as the year goes on.

On Wednesday, San Francisco Federal Reserve Bank President Mary Daly became the latest U.S. central banker to set her sights on a rate hike in the next couple of months.

"It's really time for the U.S. central bank to start removing some of the accommodation we've been giving to the economy," she said in an interview on the PBS NewsHour. "I definitely see rate increases coming, as early as March even."

Coming from Daly - who as recently as November was calling for policy patience in the face of rising prices - the remarks are a clear signal that Fed policymakers are getting ready to put an end to the pandemic era of near-zero interest rates.

In December, Fed policymakers took a step toward that eventuality, agreeing to end their bond purchases by March, and signaling they could raise interest rates three times this year.

They have been buying bonds since the onset of the pandemic to ease financial conditions and push down on borrowing costs, delivering more stimulus to the economy than low short-term rates alone.

But fast-rising prices, and the prospect that the record spread of COVID-19 could worsen the supply-chain disruptions feeding inflation, are making them more eager to act.

U.S. consumer prices rose 7% in December from a year earlier, a government report early Wednesday showed, the fastest pace in nearly 40 years.

'AS FAST AS WE CAN'

In an interview In an interview published earlier Wednesday, Atlanta Fed President Raphael Bostic said he expects the Fed to raise rates three times this year, beginning in March, published earlier Wednesday, Atlanta Fed President Raphael Bostic said he expects the Fed to raise rates three times this year, beginning in March, and to shrink the Fed's massive balance sheet rapidly.

St. Louis Fed President James Bullard told the Wall Street Journal later in the day that he now sees four rate hikes, starting in March, as a likely scenario. Just last week he had said he expected three rate hikes.

And Cleveland Fed President Loretta Mester on Wednesday told the Wall Street Journal she supports starting rate hikes in March and reducing the Fed's balance sheet "as fast as we can conditional on it not being disruptive to the financial markets."

It's not just the regional Fed bank presidents, whose views are sometimes at odds with the core group of Fed policysetters in Washington.

"The economy no longer needs or wants the very highly accommodative policy that we’ve had in place to deal with the pandemic and the aftermath," Fed Chair Powell said at his renomination hearing at the U.S. Senate on Tuesday, flagging coming rate hikes, as well as a reduction in the Fed's $8 trillion balance sheet.

And in remarks published ahead of her own nomination hearing Thursday, Fed Governor Lael Brainard said controlling inflation "while sustaining a recovery that includes everyone" is the Fed's most important task.

With the U.S. unemployment rate at 3.9% and consumer demand strong, Fed policymakers are hoping they can engineer a reduction in inflation without undermining the economic recovery or financial market stability.

"If you don’t see the March rate hike at this point, you are just dull-witted and nothing the Fed can say now will help you," tweeted SGH Macro Advisors chief U.S. economist Tim Duy, well before most of the Fed policymakers who spoke Wednesday had their say.

U.S. central bankers set sights on March rate hike
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email