The US Federal Reserve can raise the interest rate more than four times in 2022

The results of the meeting of the US Federal Reserve System forced market participants to slightly change their expectations for the further policy of the regulator. Now the markets are almost certain that the rate will be raised more than four times this year.

Since the Fed shared the «hawkish» minutes of the December meeting in early January, investors have been actively speculating about how aggressive the tightening of monetary policy will be in 2022. Most were confident that the regulator would raise the rate four times starting in March. However, now many expect five or six increases – and the rate at the level of 1.25-1.5% per annum by the end of the year.

Such assumptions were caused by comments by Fed Chairman Jerome Powell, who said that the central bank sees significant progress in the labor market and inflation is well above the target 2%, so «the economy no longer needs a high level of monetary policy support.» At the same time, the Chairman noted that the exact timing of the rate increase has not yet been adopted and the discussion of this issue will be raised at subsequent meetings. 

However, there are also those who believe that the rate will be raised only four times, but at the same time more sharply. For example, Nomura Holdings expects that the Fed in March may raise the interest rate by 50 basis points at once, and then from May to July it will raise the rate by 25 basis points.