WASHINGTON, Jan 27 ― The Federal Reserve yesterday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what US central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.
But Powell was explicit on one key point: that with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the US economy during the coronavirus pandemic. Yields on longer-dated Treasury securities, sensitive to the Fed's balance sheet policy, rose as Powell signaled that a decision would be made soon on when to start shrinking the central bank's more than US$8 trillion portfolio of US government bonds and mortgage-backed securities . The dollar surged 0.5 per cent to its highest level in a month against a basket of key trading partners' currencies.
A myriad of risks remain, from a pandemic that is still underway to a potential Russia-Ukraine military conflict.
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