Fed members predict three rate hikes in 2022

Dec. 15, 2021 2:09 PM ETBy: Brian Stewart, SA News Editor30 Comments

Exterior of the US Federal Reserve Building in Washington DC

uschools/E+ via Getty Images

  • Top officials at the Federal Reserve unanimously expect a rate hike sometime in 2022, with two-thirds of the central bank's policy-setting committee predicting at least three quarter-point increases during the year.
  • The latest signal from Fed indicates an aggressive turn to a more hawkish stance, prompted by mounting evidence of a looming inflation threat.
  • This updated outlook was reflected in the central bank's so-called dot-plot, a closely watched summary of the Fed's expectations for the future. The dot-plot, which was released on Wednesday, outlines the projections held by the 18 members of the Federal Open Market Committee, the central bank's rate-setting body.
  • Surveying the FOMC's 18 members, the dot-plot showed that all of them now expect at least one rate hike will take place in 2022. At the same time, 12 of the policymakers see at least three quarter-point hikes during the year. Two of those surveyed think four increases will be necessary.
  • The last update, released in September, indicated that only nine members, or half the FOMC, projected a tightening in 2022.
  • The Federal Reserve has ratcheted up its rate expectations throughout the year, amid ongoing signs that inflation has not been as "transitory" as policymakers once hoped.
  • In June, less than half of Fed members predicted a 2022 rate hike, with only seven out of 18 sensing that an increase would be necessary that soon. At that time, five members didn't expect a rate hike to occur before the end of 2023.
  • By September, the continued inflation threat forced many policymakers to move up their plans for rate increases. The projection released at that time showed the FOMC was split evenly on the necessity of a 2022 increase, with only a single holdout believing that rates could remain near zero through the end of 2023.
  • Since that September dot-plot, inflation figures have continued to show accelerating price increases, with recent figures pointing to decades-high levels.
  • This trend included data from earlier this week, which showed a 9.6% annual increase in producer prices for November -- the highest reading since the government started tracking the number in 2010.
  • Last week, a separate data set indicated that consumer prices rose 6.8% in November. This marked the highest annual pace of growth since 1982.
  • You can see the Fed's dot-plot here:

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