The Federal Reserve is prepared to make its first interest rate hike as early as March. While analysts speculate whether rates will rise by a quarter percentage point or more sharply, central bankers do not want to act rashly.
“I don’t see any compelling argument for taking a big step at the outset,” John Williams, head of the New York branch of the Federal Reserve, told reporters on Friday. Williams is also the “number two” on the committee that sets monetary policy parameters. “I think we can raise interest rates gradually,” he said.
His words were also confirmed by Lael Brainard, who is President Joe Biden‘s nominee for Fed vice governor. “We’re more likely to start a series of rate increases at the next few meetings,” she said. She said the market is now attuned to such a course and the Fed doesn’t want to make changes that aren’t consistent with expectations.
But markets have begun to adjust to the idea that rates could rise by half a percentage point in March after the release of January inflation data, the highest in the US in 40 years. Now it seems that they can count on a quarter-percentage-point “hike”.