Fed raises rates as inflation rages and projects six more hikes this year

The Federal Reserve on Wednesday raised interest rates for the first time since 2018, and officials projected at least six more increases might be needed this year as they move to curb consumer price spikes across the economy.

The quarter-point increase is the first since the Fed slashed rates to zero at the onset of the pandemic,

Central bank policymakers acknowledged that inflation — now at a 40-year high — won’t be going away quickly, although they expect it to slow over the course of the year. The Fed was already planning to begin hiking rates in March amid a blistering job market and rapidly rising prices, but Russia’s attack on Ukraine has clouded the outlook since surging energy costs could stoke inflation further and, at the same time, slow the economy down.

“The invasion of Ukraine by Russia is causing tremendous human and economic hardship,” the Fed’s rate-setting committee said in a statement after the meeting. “The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.”

Fed officials estimate inflation will be increase by 4.3 percent by the end of the year — which would be a considerable improvement over the 6.1 percent annual rise reported in January but much higher than their previous 2.7 percent forecast for 2022. They expect economic growth to slow to 2.8 percent, a sharp drop from their last projection, released in December, of 4 percent.

So far, however, the central bank is not predicting much pain in the job market. It sees the unemployment rate ending the year at 3.5 percent and staying there until 2024, when it will tick up to 3.6 percent.

The Fed is now targeting between 0.25 and 0.5 percent for its main borrowing rate. If it follows through on the rate hikes envisioned this year, the federal funds rate target would be nearly 2 percent.