LONDON : The U.S. Federal Reserve has kicked off 2022 with a clear message: rates will rise to contain surging inflation.
The bank last month took rates to 0.5per cent and at its January meeting it flagged a March rate hike. New Zealand hiked rates in November for a second time to 0.75per cent and forecast they would reach 2.5per cent by 2023. Markets price in a 90per cent chance of a Feb rate hike and anticipate four 25 basis-point rises by end-2022. The Federal Reserve on Wednesday signalled its intent to raise interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.
December inflation at 4.8per cent was the highest since 1991 and well above the bank's 1per cent-3per cent control range. Markets are pricing a 90per cent chance of a hike to 0.50per cent in March 2, and at least five increases this year.With the hottest consumer inflation since 2014 and strongest labour market since 2008, the Reserve Bank of Australia will face immense pressure at next week's meeting to abandon its dovish stance.
Headline inflation in December was 4.1per cent versus the 2per cent target. The December surge was due mainly to electricity prices and overall price pressures remain modest, central bank Governor Stefan Ingves said earlier this month.It said last month it would end its 1.85 trillion euro pandemic emergency asset-buying scheme by end-March.
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