1. Skip to content
  2. Skip to main menu
  3. Skip to more DW sites

US: Fed likely to raise rates amid soaring inflation

January 26, 2022

Federal Reserve chairman Jerome Powell hinted that the central bank will reverse its pandemic-era policies at its next meeting. Rising prices for consumers have become a campaign issue ahead of congressional elections.

A person walks past a sale sign
US inflation reached a four-decade high of 7% in DecemberImage: Florian Gaertner/photothek/imago images

Federal Reserve Chair Jerome Powell indicated on Wednesday that the US central bank was ready to increase its lending rate at its next meeting for the first time since the start of the pandemic.

 "I would say the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so," Powell said in an uncharacteristically open comment following a two-day meeting of the Fed's policy committee.

The move would signal an end to the Fed's pandemic-era tactics that have kept hiring and growth levels steady but caused a noteworthy spike in inflation.

Raising its interest rate could alleviate the squeeze being felt by consumers, but could also make borrowing more expensive over time.

"The best thing we can do to support continued labor market gains,'' Powell said, "is to promote a long expansion, and that will require price stability.''

"I think there's quite a bit of room," he added, "to raise interest rates without threatening the labor market. This is by so many measures an historically tight labor market.''

High inflation has become a serious political threat to President Joe Biden and congressional Democrats, with Republicans pointing to rising consumer prices as one of their principal lines of attack as they look toward the November midterm elections.

The stock market has been somewhat unstable over uncertainly over how far the Fed will go to reverse its low-rate policies.

Asked about the volatility, Powell said his agency was focused on the "real economy," but that "the communications we have with market participants and the general public are working. Monetary policy works significantly through expectations.''

es/msh (AP, AFP)