Fed expected to make big rate boost, go into full-time inflation-fighting mode
The Federal Reserve is widely expected to take a big step this week on its “expeditious march” to get its key interest rate back to a more normal level.
Two weeks ago, Federal Reserve Bank of San Francisco Mary Daly used that word — expeditious — in describing her itinerary for ending the Fed’s very accommodative interest rate policy it instituted in the early weeks of the pandemic.
The market is certain the big step will be at least a one-half 1% percent bump and possibly as much as three-quarters of 1% rate hike on Wednesday. If it’s the larger step, it would take the Fed’s target shortterm borrowing rate to its highest level since February 2020. And it would represent the fastest interest rate hikes in generations.
Make no mistake, the central bank has fully transitioned into a fulltime inflation-fighting organization. Critics complain it is late to the fight, and they’re not wrong. Overall consumer prices are rising by 8% and proving to be sticky. Focusing on items with prices that tend to change slowly — rent, home insurance, eating out — shows a more moderate but still elevated almost 5% increase in March, according to data from the Federal Reserve Bank of Atlanta.
The Fed abandoned hopes inflation would be transitory late last year. After raising its target rate by a small quarter percent in March, central bankers have been gathering in a chorus alerting investors and borrowers to expect a bigger move this month, and probably for the next several meetings.
There’s more than the rate hike, though. The bank could announce it is beginning to sell bonds it bought during the pandemic in its efforts to stave off a deep and disastrous depression. This so-called
Tom Hudson hosts ‘The Sunshine Economy’ on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView