Fed plans to raise rates as soon as March

The Federal Reserve signaled Wednesday that it plans to begin raising its benchmark interest rate as soon as March, a key step in reversing its pandemic-era low-rate policies that have fueled hiring and growth but also escalated inflation. (Jan 26)

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Fed leaves rates unchanged as economic activity and employment strengthen

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Facing both turbulent financial markets and raging inflation, the Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years as part of a broader tightening in historically easy monetary policy.

In a move that came as little surprise, the Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first increase since December 2018.

Chairman Jerome Powell added that the Fed could move on an aggressive path.

“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” Powell said at his post-meeting news conference. After being up strongly earlier, the major stock market averages turned negative shortly following Powell’s pronouncement.

The committee’s statement came in response to inflation running at its hottest level in nearly 40 years. Though the move toward less accommodative policy has been well-telegraphed over the past several weeks, markets in recent days have been remarkably choppy as investors worried that the Fed might tighten policy even more than expected.

The post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting. The statement was adopted without dissent.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be
appropriate to raise the target range for the federal funds rate,” the statement said. The Fed does not meet in February.

In addition, the committee noted the central bank’s monthly bond-buying will proceed at just $30 billion in February, indicating that program is expected to end in March as well at the same time that rates increase. Powell said later that the asset purchases indeed likely will end in March.

There were no specific indications Wednesday when the Fed might start to reduce bond holdings that have bloated its balance sheet to nearly $9 trillion.

However, the committee released a statement outlining “principles for reducing the size of the balance sheet.” The statement is prefaced with the notion that the Fed is preparing for “significantly reducing” the level of asset holdings.

That policy sheet noted that the benchmark funds rate is “primary means of adjusting the stance of monetary policy.” The committee further noted that the balance sheet reduction would happen after rate hikes start and would be “in a predictable manner” by adjusting how much of the bank’s proceeds from its bond holdings would be reinvested and how much would be allowed to roll off.

“The Fed’s announcement that it will ‘soon be appropriate’ to raise interest rates is a clear sign that a March rate hike is coming,” noted Michael Pearce, senior U.S. economist at Capital Economics. “The Fed’s plans to begin running down its balance sheet once rates begin to rise suggests an announcement on that could also come as soon as the next meeting, which would be slightly more hawkish than we expected.”

Markets had been anxiously awaiting the Fed’s decision. Stocks added to gains afterwards while government bond yields were mostly higher, though only slightly.

Investors had been expecting the Fed to tee up the first of multiple rate hikes, and in fact are pricing in a more aggressive schedule this year than FOMC officials indicated in their December outlook. At that time, the committee penciled in three 25 basis point moves this year, while the market is pricing in four hikes, according to the CME’s FedWatch tool that computes the probabilities through the fed funds futures market.

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Watch Live: Federal Reserve chairman Jerome Powell discusses interest rates | CBS News

Federal Reserve Chairman Jerome Powell is expected to speak to reporters at 2:30 p.m. ET on Wednesday to discuss interest rates amid rising inflation. The U.S. stock market volatility has flared in the last two days as investors await the Federal Reserve’s decision on raising interest rates.

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Oklahoma COVID hospitalizations are rising amid low vaccination rates, dwindling hospital beds

Hospitalization rates for the Omicron variant are lower nationwide compared to previous waves and states with low vaccination rates. In Oklahoma, people are suffering disproportionately. Kris Van Cleave has the latest from Oklahoma, where hospitalizations are soaring.

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Interest Rates Expected To Be Raised By Federal Reserve Combating Inflation

The Federal Reserve could announce Wednesday it will raise interest rates as the nation is still dealing with fallout from the pandemic, supply disruptions and decades-high levels of inflation. The hike in interest rates comes as Americans are paying more for goods and often waiting longer to get them. NBC’s Tom Costello reports for TODAY.

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Omicron batters states with low vaccination rates

Thursday marks two years since the first case of COVID-19 was reported in the U.S. CBS News’ Bradley Blackburn has more on how the virus is impacting states with low vaccination rates, and the battle over masks in schools. Then, emergency medicine physician Dr. Anand Swaminathan joins CBSN’s Lana Zak to discuss the latest.

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China cuts rates as others plan hikes

China lowered mortgage lending benchmark rates as monetary authorities step up efforts to prop up the slowing economy.

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Omicron driving up infection rates around Europe | DW News

Poland is bracing for a surge in coronavirus cases and is likely to be racking up 60.000 cases by mid-February according to the government. But a large percentage of the people in Poland are still unvaccinated. Only 23% of the population have had their booster.

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