WASHINGTON (AP) – The Federal Reserve signaled Wednesday that it will begin a series of interest-rate hikes in March, reversing pandemic-era policies that have fueled hiring and growth – and stock market gains – but also high inflation.
Chair Jerome Powell said at a news conference that inflation has gotten “slightly worse” since the Fed last met in December. He said raising the Fed’s benchmark rate, which has been pegged at zero since March 2020, will help prevent high prices from becoming entrenched.
Powell said the central bank can manage the process in a way that prolongs economic growth and keeps unemployment low. “I think there is quite a bit of room to raise interest rates without threatening the labor market,” he said.
The Fed’s rate hikes will make it more expensive, over time, to borrow for a home, car or business. The Fed’s intent is to temper economic growth and cool off inflation, which is at a 40-year high and eating into Americans’ wage gains and household budgets.
“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.”