New York (CNN Business)The Federal Reserve is getting ready to raise interest rates, the central bank said in its monetary policy update Wednesday. But it kept rates near zero for now.
“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,” the Fed statement read.
Prices continued to climb into the end of 2021 and economists expect to see the peak of this inflation cycle in the early months of this year.
The Fed’s preferred measure of inflation rose to 5.7% in the 12 months ended in November, the fastest increase in the consumer spending price index since July 1982.
The central bank slashed rates to near zero in March 2020 when the pandemic put the US economy into a choke hold.
Last month, the Fed signaled it would hike interest rates multiple times throughout 2022. Investors expect the first rate hike to take place at the Fed’s next meeting in March: Market expectations for a rate increase in March climbed above 95% following the Fed announcement, from just below 90% before, according to the CME FedWatch tool.
In November, the Fed also announced the end of its pandemic-era stimulus and accelerated the roll-back of its asset purchases the following month.
The bank will continue reducing its monthly asset purchases and end them in early March, it said Wednesday.
After the end of the stimulus program and liftoff in interest rates, reducing its massive balance sheet is next up on the Fed’s to-do list. The bank affirmed that it only expects to start focusing on balance sheet reduction after the rate hikes have begun.
This is a developing story. It will be updated
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