US Fed signals three rate hikes in 2022, set to close bond-tapering by March



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US Fed signals three rate hikes in 2022, set to close bond-tapering by March

On Wednesday, following its two-day long December policy meet, the US Federal Reserve had hinted at least three quarter-percentage point rate-hikes in 2022, while the US Federal Reserve also had acknowledged that its inflation targets had been met and it would conclude bond-taper program by March, 2022.

Besides, according to new economic forecasts which were released following the US Fed’s December policy meet, Fed policymakers had projected that US inflation could be turned down to 2.6 per cent next year compared to a September forecast of 2.2 per cent, while US unemployment rate would fall further to a pre-pandemic low of 3.5 per cent.

In tandem, as the US Fed seeks to address a sharp uptick in inflation indicators with aims to tone down the rate of annual inflation to 2.6 per cent compared to a current 3.6 per cent, the US Central Bank’s benchmark borrowing cost ought to be raised to 0.90 per cent by end-2022, stoking prospects of kickstarting a string of rate-hikes that could witness a raise in the US Fed’s overnight lending cost to 1.6 per cent in 2023 and 2.1 per cent in 2024.

US Fed to conclude bond-taper by March, 2022

Meanwhile, referring to a rapidly strengthening US economy, US Fed Chair Jerome Powell said in a press conference following the meet, “The economy no longer needs increasing amounts of policy support.

In my view, we are making rapid progress toward maximum employment”. The US Fed, in tandem, had agreed to conclude its bond-taper program by March, 2022, about a quarter earlier than its previous target of mid-2022.

However, the timing of a first rate-hike would depend on a roaring US job market which is reportedly closing in on a maximum employment, said the US Fed.