Federal Reserve Would Raise Interest Rates in March and Sell Bonds By

• The president of the Fed, Jerome Powell, gave clues about the expected rise in interest rates, although it is sought not to impact the level of employment.
• Investors are concerned about the scope of the rise in interest rates.
• At the end of the year, the rate is expected to be at 1%, from the level close to zero where it is now.

US Federal Reserve Chairman Jerome Powell spoke on Wednesday about the likelihood of asset purchases ending in March. It is also likely that the bank will start selling bonds, after raising the interest rate, whose first increase is estimated at a quarter of a percentage point.

In a document published by the US central bank, the policy to be followed this year was outlined. The bank announced that it will begin to significantly reduce bond holdings on its balance sheet, although it did not specify when.

To deal with the turmoil in financial markets and try to stem raging inflation, the Fed sent a pretty clear message that in March it might raise interest rates for the first time in more than three years.

The announcement of a tightening of the bank’s monetary policy, which in recent times has remained very flexible, did not come as a surprise to anyone. The Fed’s policymaking group indicated that an increase in the reference rate for short-term loans is very likely.

Main stock indices fell

If the rate rises a quarter of a percentage point as expected, it would be the first rate hike in three years. In his statements to the press, Powell pointed out that the body has a very wide margin of action.

“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” said the Fed chairman, after the meeting of the Federal Open Market Committee, according to CNBC.
Following Jerome Powell’s statements, the averages of the main stock market indices, which had risen sharply during the day, fell again. There is a lot of concern and agitation in the markets about the decisions that the Fed makes in the coming months.

Inflation in the US has reached record levels in the last 40 years. Although it is considered a fact that the Fed has to tighten its loose monetary policy to stop the price escalation, investors are worried that interest rates will rise more than expected.

Rates will rise but it is not known when or how much

The statement issued by the Fed at the conclusion of the meeting of the Federal Open Market Committee (FOMC), did not report when interest rates will rise. But it is expected to come after the March meeting.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said.
The committee reported that the monthly bond purchase for February will be only $30 billion. Following this announcement, Wall Street analysts expect the pandemic financial support program to end in…