Fulfilling widespread expectations, the Federal Reserve (Fed) finally expressed its readiness to raise interest rates soon at the FOMC policy meeting that took place early this morning.
“In line with the termination of its bond purchases in March, policymakers plan to raise interest rates at the next policy meeting on the assumption that conditions are appropriate to do so,” Chairman Jerome Powell said.
The statement was made in response to inflation rising to its highest level in nearly 40 years and the job market showing a strengthening with the unemployment rate having returned to pre-pandemic levels.
Meanwhile, Powell also said further interest increases and a reduction in the central bank's asset holdings would follow as needed, adding that he was confident they could take action without compromising the recovery.
He also suggested that policymakers be prepared to move faster, noting that the economy is stronger than 2015.
What is even more surprising is when the Fed also mentioned their readiness to reduce the balance sheet. This reduction will be the focus of the Fed once their bond -buying program ends.
This is so because, Powell once said that they would not make a reduction in the balance sheet because it took more time to talk about it.
Ultimately, the Fed decided to leave interest rates unchanged at the 0 to 0.25% target range and reiterated that its bond -buying program would end in March at the January edition policy meeting.
