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Fed Expected to Raise Interest Rates in 2022

The U.S. Federal Reserve will begin winding down its COVID-19 stimulus policies as the body seeks to curb rising inflation. The Fed is penciling in three interest rate hikes in 2022 as a means of ending the fastest rate of inflation seen in nearly half a century.

Fed Votes to Target Rampant Inflation in 2022

The Federal Reserve will raise interest rates for the first time since the start of the coronavirus pandemic. During the latest Federal Open Market Committee (FOMC) meeting, the group agreed that it would accelerate reducing its asset-purchase program to $30 billion a month, a timeline designed to phase out the purchase program entirely by March rather than the original June date forecast last month.

The FOMC voted to continue to hold interest rates near zero (where they’ve stayed since March 2020), although there are plans for at least one rate hike next year – with the option for up to three. Officials now project rates to reach 0.9% by December 2022, 1.6% at the end of 2023, and 2.1% at the end of 2024.

FOMC Moves to Tackle Inflation Fears

The latest move from the Fed follows worryingly high inflation. Consumer prices rose 6.8% in November from the same time in 2020, the fastest increase since June 1982. The FOMC’s move is designed to tackle “inflation developments and the further improvement in the labor market.”

“In light of inflation developments and the further improvement in the labor market, the Committee decided to reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities,” the FOMC said in a statement.

“With inflation having exceeded two percent for some time, the committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment.”

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About: Cory
Cory Santos

Cory is BestCards.com's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. Cory holds academic degrees in both the U.S. and U.K. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.

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