Fed interest rate

NEW YORK (BLOOMBERG) - The Federal Reserve raised interest rates by a quarter percentage point and signalled hikes at all six remaining meetings this year, ...

Bloomberg Economics predicts the Fed could end up lifting rates to as high as 3.25 per cent some time next year, which would be the highest since 2008. American households and businesses have reacted with alarm to rising costs, with retail petrol surpassing US$4 a gallon, though it could fall following the latest drop in crude oil. Forcing the pace is a surge in inflation which has proved stronger and more sustained than anticipated. The Fed is not alone in turning more hawkish. They estimated a 2.8 per cent rate in 2024, the final year of the forecasts, which are subject to even more uncertainty than usual given Russia’s invasion of Ukraine and new Covid-19 lockdowns in China are buffeting the global economy. The forecast for economic growth this year was lowered to 2.8 per cent from 4 per cent, while unemployment projections were little changed. The Fed said it would begin allowing its US$8.9 trillion (S$12 trillion) balance sheet to shrink at a “coming meeting” without elaborating. Shift too quickly and the central bank could roil markets and tip the economy into recession. Instead, price gains accelerated amid a mixture of massive government stimulus, tightening labour markets, surging commodity costs and frayed supply chains. Tighten too slowly and it risks allowing inflation to run out of control, requiring even tougher action. St Louis Fed president James Bullard dissented in favour of a half-point hike, the first vote against a decision since September 2020. The hike is likely the first of several to come this year, as the Fed said it “anticipates that ongoing increases in the target range will be appropriate”, and Mr Powell repeated his pledge to be “nimble.”