The Federal Reserve is taking off the gloves in its bid to fight a historic surge in inflation.
The Fed held its key interest rate near zero Wednesday but said it will “soon be appropriate” to raise it, hinting that a rate hike in March is all but certain. The increase would be the first in more than three years and kick off what’s likely to be a flurry of three or more quarter-point increases this year aimed at reining in sharply rising consumer prices.
Speculation about the widely expected move has been a major reason for the stock market’s sharp sell-off this month. The Fed’s statement wiped out the market’s gains Wednesday, and the Dow Jones industrial average closed down 130 points.
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In a statement after a two-day meeting, the Fed didn’t say the economy has reached full employment, which would fulfill the central bank’s second condition for raising rates, but it did cite a “strong labor market.”
At a video news conference, Fed Chair Jerome Powell said he and other policymakers believe that “labor market conditions are consistent with maximum employment.”
The Fed previously said its other benchmark – inflation running above 2% for “some time” – had been met.
Is Fed raising rates?
“With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise” its key interest rate, the Fed said.
Powell said policymakers are “of a mind” to boost the rate in March, “assuming conditions are appropriate for doing so.”
The central bank increases rates to curb borrowing, temper an overheated economy and stave off inflation spikes, and it lowers them to spur borrowing, economic activity and job growth…ReadMore…