WASHINGTON, DC — The
Federal Reserve (Fed) opened its
two-day policy meeting on Tuesday, focused squarely on how to address the
worsening
US inflation threat.
اضافة اعلان
Fed Chair Jerome Powell has signaled that the central bank
will pull back on its pandemic stimulus measures more quickly, which would put
it in position to raise interest rates and try to quash the wave of rising
prices that have hit American households.
A Fed spokesperson confirmed the start of the two-day
meeting of the policy-setting
Federal Open Market Committee (FOMC), which will
wrap up Wednesday with a statement and press conference where policymakers are
expected to announce the Fed will further reduce the rate of its monthly bond
purchases.
That will put it on a pace to end the program in March,
weeks earlier than initially planned, and then leave the central bank poised to
act directly against inflation by hiking the benchmark borrowing rate as early
as May.
Powell for months has argued that most of the price
increases were due to temporary pandemic-linked factors that would dissipate,
but in late November he acknowledged that inflation could be
"persistent".
Annual consumer price inflation hit a nearly 40-year high of
6.8 percent in November, with data showing the increases continuing to spread
beyond autos and energy to food and housing.
Inflation pressures growing?
The Labor Department reported Tuesday that the producer
price index surged 9.6 percent in the 12 months ended in November, which the
FOMC may take as another sign of rising price pressures as the economy recovers
from the
COVID-19 pandemic.
It was the biggest jump since the Labor Department began
calculating the index in November 2010, pushed by increases in a broad array of
goods and services, which could spread to consumers.
Though economists believe inflation may have peaked as
supply issues due to the pandemic restrictions are resolved, that does not ease
the pressure on the Fed to act to prevent the price increase from becoming a
self-fulfilling prophecy.
"While we continue to expect producer prices to reach
an apex in (the fourth quarter), persistent supply headwinds will keep input
and transportation costs sticky and only allow for a gradual moderation in
price," said Mahir Rasheed of
Oxford Economics.
Powell in testimony before Congress last month repeated his
pledge that policymakers "will use our tools to make sure that higher
inflation does not become entrenched."
The FOMC will release its quarterly economic forecasts,
which are expected to show committee members shifting to a more aggressive
stance on interest rate hikes.
Economists expect central bankers to lean towards three or
even four hikes in 2022, rather than just one projected in September.
But the rapid spread of the
Omicron variant of COVID-19,
which has caused some countries to reimpose restrictions, is casting a shadow
over the economic outlook that could complicate the job of the central bank.
"Omicron has clearly added a huge cloud of uncertainty
over the outlook for the economy in the coming months just as many countries
were preparing for tighter monetary policy," said Craig Erlam of Oanda.
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