The Federal Reserve on Wednesday signaled it is ready to tackle inflation as prices have shot up in the past year and millions of Americans are facing the strain of higher costs. Following two days of policy meetings, officials strongly indicated the hike is just on the horizon.
"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," a statement from Fed leaders read.
Speaking to reporters following the meeting, Federal Reserve Chairman Jerome Powell did not reveal details on how much the Fed couldthis year or how often to expect increases. Fed officials previously signaled rates could be increased three times this year. Some economic forecasters now anticipate at least four hikes starting in March.
"It is not possible to predict with much confidence exactly what path for our policy rate is going to prove appropriate," Powell said. "So at this time, we have not made any decisions about the path of policy."
Powell said they will make a decision at the next meeting, set for March 15 and 16, but that the committee is prepared to raise the rate assuming conditions are appropriate. Powell said decisions will be "humble and nimble" and guided by the data. He noted the U.S. economy is in a very different, much stronger place than when the Fedfor the first time in nearly a decade.
The Fed acknowledged thatand longer than anticipated. Powell said since its December meeting, the situation is about the same but probably "slightly worse." He acknowledged inflation forces people on fixed incomes living paycheck to paycheck to make very difficult decisions. Some people are just "prone to suffer more," he said, and inflation is particularly hard on people with fixed incomes and low incomes.
He said the Fed will move away from very accommodative policy to help address inflation. Fiscal policy will also play a role, he said and eventually there will be relief on the supply side, but it's taking much longer.
"I would not say that I expect the supply chain issues to be completely worked out by the end of this year," Powell said. "I expect progress to be made in the second half of this year mainly."
As the Federal Reserve signals readiness to raise interest rates, Powell said he believes there's "quite a bit of room" to hike rates without hurting the labor market, calling it "by many measures, an historically tight labor market." The Federal Reserve chairman noted how 2021 has shown record level job openings, quits and wages moving up at the fastest pace in decades.
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