The Federal Reserve on Wednesday, 16th of March 2022, raised interest rates by 0.25%, which is the first hike since 2018.

Fed officials indicated an aggressive plan to push borrowing costs to restrictive levels in a pivot from battling the coronavirus pandemic to countering the economic risks posed by excessive inflation and the war in Ukraine.

The new Fed projections indicated that policymakers are ready to shift their inflation fight into a higher gear, with one policymaker, St. Louis Fed President James Bullard, dissenting in favour of a more aggressive approach.

Most policymakers are seeing the federal funds rate rising to a range between 1.75% – 2% by the end of 2022. Jerome H. Powell indicated that he sees the probability of a recession over the next year as not high and said that the economy is strong enough to see rate hikes and maintain its current strong hiring and wage growth

“The way we’re thinking about this is that every meeting is a live meeting” for a rate hike, Powell said in a news conference, “We’re going to be looking at evolving conditions, and if we do conclude that it would be appropriate to move more quickly to remove accommodation, then we’ll do so.”

The last rate hike occurred in December 2018. The FOMC predicts that rates will move in the next few years, suggesting that Fed officials are highly uncertain about the future. The yield on the benchmark US 10-year Treasury note fell back to 2.19%, while 2-year ones jumped to 1.93%, closer to inversion.

The Fed is also making plans to tighten the money supply by shrinking its $9 trillion balance sheet and is likely to act on those plans in an upcoming meeting.