Expectations are rising that the US Federal Reserve will make jumbo, half-point interest rate increases this year, as central bank officials signal that they may soon need to step up efforts to reduce the highest inflation in 40 years.
Wall Street economists moved en masse this week to revise their 2022 forecasts for monetary policy, projecting the Fed will double the pace at which it is raising rates at one or more of its forthcoming meetings. The central bank delivered its first increase since 2018 this month, lifting the federal funds rate by a quarter of a percentage point to a new target range of 0.25 per cent to 0.50 per cent.
The economists took their cue from some of the most senior policymakers on the Federal Open Market Committee, who this week were explicit about the central bank’s willingness to take aggressive action given price pressures.