Fed expects to raise interest rates four times this year

Image copyright The Federal Reserve Image caption Prices jumped in January following two months of declines

The Federal Reserve is committed to gradually raising interest rates, officials have said, in the face of concerns over a spike in inflation.

At its last meeting of the year, the Federal Open Market Committee (FOMC) voted unanimously to leave interest rates unchanged, in a statement published on Wednesday.

It said it still expected to raise interest rates four times this year, but now believed it could happen sooner than it had previously thought.

On Friday, prices in the US jumped in January.

In December, the FOMC had raised interest rates by a quarter percentage point.

It said it wanted to keep prices rising “at a gradual pace”, but now believed that the Fed’s “central tendency” for inflation could be as high as two percent.

Prolonged period of low inflation

The FOMC also announced that it would begin its new round of regular asset sales.

It is currently buying about $30bn (£22bn) of Treasury bonds each month, in an effort to keep interest rates low.

In December, the Fed increased its annual growth forecast to 2.9% from 2.7%, which has spurred a stronger dollar.

But the global economy is slowing, US rates are still low, oil prices are rising, the dollar is rising and oil prices are still going up.

The FOMC said that it expected economic growth would slow to a 2.5% annual pace in 2018, from last year’s 3.2% rate.

It also said that unemployment would be a little lower than its previous forecast.

But it added that longer-term inflation expectations were unchanged.

Image copyright AFP Image caption Goldman Sachs’ vice-chairman has called for the Fed to move much faster on the asset sales

The US is currently in a phase of high inflation, which is particularly concerning for policymakers because inflation data can be volatile.

Once it reaches a certain level, it usually is followed by a period of deflation.

Traders on the futures market see a one-in-four chance of another rate rise in March, while a four-in-four chance is seen in April.

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