Last week the Federal Reserve began its long-publicized tightening of monetary policy. The Board raised the overnight fed funds target rate to .25-.50% . Six more raises are planned which would take this rate at year end to around 2%.
The consensus of economists is the Fed’s plan may be a day late and dollar short. From MSNBC columnist Kelly Evans right after the announcement:
The Fed published a crucial update in its projections yesterday that showed members now expect the short-term Fed funds rate to hit 2.8% by the end of next year–up from only 1.6% in their December projections. In just three months’ time, in other words, as inflation has shot way higher than anyone at the Fed expected, the committee is signaling the need for almost ten rate hikes by late next year, roughly twice as many as they previously thought necessary.
In his March 21st speech to National Association of Business Economists (NABE) Fed Chairman Jerome Powell unveiled an even more hawkish view. Increases could be in .50% increments if needed to counter inflation.
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