The Federal Reserve said that it could raise interest rates for the first time in over three years in March, but it kept rates near zero for now.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said.
Chairman Jerome Powell told reporters that March is when people can anticipate the raise, as the Federal Reserve does not meet in February.
"I would say the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so," Powell said.
Consumer prices are up 7% in the last 12 months, the fastest increase since July of 1982.
Powell told reporters that there's no point in trying to guess when the rate increase will happen this year, or how big they will be.
"It is not possible to predict with much confidence exactly what path for our policy rate is going to prove appropriate," Powell said.
The central bank slashed its benchmark rate to a target of 0%-0.25% early on in the COVID-19 pandemic.
“Part of this will be the Fed moving away from very high accommodative policy to substantially less accommodative policy and over time to a policy that’s not accommodative,” Powell said.
The Fed's total assets on its balance sheet is nearly $9 trillion because of its bond-buying program. Powell said they plan to wait a few months before starting to allow proceeds from the bond holdings to run off each month and reinvest the rest. They currently reinvest all of those proceeds.
“The balance sheet is substantially larger than it needs to be,” Powell said. “There’s a substantial amount of shrinkage in the balance sheet to be done. That’s going to take some time. We want that process to be orderly and predictable.”