NEW: The Federal Reserve signaled it may start raising its benchmark interest rate sometime next year, earlier than it envisioned three months ago and a sign that it’s concerned that high inflation pressures may persist.
The Associated Press
Taken together, the Fed's plans reflect its belief that the economy has recovered sufficiently from the pandemic recession for it to soon begin dialing back the extraordinary support it provided after theparalyzed the economy 18 months ago. As the economy has steadily strengthened, inflation has also accelerated to a three-decade high, heightening the pressure on the Fed to pull back.
In its updated quarterly projections, Fed officials now expect to raise their key short term rate once in 2022, three times in 2023 — one more than they had projected in June — and three times in 2024. That benchmark rate, which influences many consumer and business loans, has been pinned near zero since March 2020, when the pandemic erupted.
Taken together, the Fed’s pullback in bond purchases and its eventual rate hikes, whenever they happen, will mean that some borrowers will have to pay more for mortgages, credit cards and business loans. But the changes in the Fed’s interest rate projections suggest that the central bank is moving gradually closer to doing so. In March, the 18 officials who make up its policymaking committee predicted that they wouldn’t raise rates at all until after 2023. In June, the committee revised its forecast to two rate hikes in 2023. And now it sees a rate hike as soon as next year.
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