Officials are poised to push the expected path of interest rates higher yet again, the third time in their two-year battle against inflation
U.S. Federal Reserve officials meet next week again chasing persistent inflation but now balancing that against the first acute tremors from the aggressive interest rate hikes the central bank approved over the past year.last week isn’t expected to prevent the Fed from continuing to raise interest rates at its March 21-22 meeting, with inflation still running far above the Fed’s 2% target and Fed chair Jerome Powell indicating monetary policy might need to become even more aggressive.
Given the stakes that bit of dissonance seemed unavoidable, and may be accompanied by a slightly softer approach to monetary policy if risks are seen to be intensifying. The inflation rate in January actually rose, while an Atlanta Fed real-time projection as of March 8 showed gross domestic product expanding at a 2.6% annual rate, well above the economy’s roughly 2% underlying potential.
New inflation data to be released Tuesday and retail sales data on Wednesday both have the potential to push policymakers in either direction at the two-day meeting, which concludes March 22 with a new Federal Open Market Committee statement and projections issued at 2 p.m. EDT , and a press conference by Powell at 2:30 p.m.
“The ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in congressional testimony that reset expectations for where the Fed was heading, and pushing yields on U.S. Treasury bonds higher and prompting a sell-off in equity markets. Government reports released after Powell’s last press conference showed the central bank’s preferred measure of inflation had risen slightly to a 5.4% annual rate.
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