It Will 'soon Be Appropriate' To Hike Rates: US Fed

The Federal Reserve on Wednesday kept US interest rates at zero but said an increase is coming soon, citing improvements in the employment situation and persistently high levels of inflation.

"With inflation well above two percent and a strong labour market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate," the policy-setting Federal Open Market Committee (FOMC) said at the conclusion of its regular meeting.

While it gave no exact date, the central bank's first rate hike since the start of the Covid-19 pandemic could come as soon as March, when its bond-buying stimulus programme is scheduled to end. Officials have said it won't begin to increase the benchmark borrowing rate until that is completed.

The US central bank pivoted quickly as inflation accelerated last year, but the statement said "progress on vaccinations and an easing of supply constraints" should lead to lower inflation.

The committee also released guidelines for beginning to shrink the size of its massive holdings of bonds and securities accumulated mostly during the recent economic crisis, when it intervened to bolster financial markets.

The FOMC noted it "expects that reducing the size of the Federal Reserve's balance sheet will commence after the process of increasing the target range for the federal funds rate has begun". (AFP)