Inflation-fighting Fed expected to signal March interest rate hike - Reuters

Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen as a trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., December 15, 2021. REUTERS/Andrew Kelly/File Photo

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• Central bank signals likely to raise rates in March
• Fed's Powell to speak at 2:30 p.m. EST (1930 GMT)

WASHINGTON, Jan 26 (Reuters) - The Federal Reserve on Wednesday signaled it is likely to raise U.S. interest rates in March and reaffirmed plans to end its bond purchases that month before launching a significant reduction in its asset holdings.

The combined moves will complete a pivot away from the loose monetary policy that has defined the pandemic era and toward a more urgent fight against inflation.

"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 U.S. central bank's rate-setting Federal Open Market Committee said in a policy statement.

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The Fed also said its FOMC members had agreed on a set of principles for "significantly reducing" the size of its asset holdings by limiting how much of the principal from maturing bonds it would reinvest each month. That plan would start after the liftoff in interest rates, the Fed said, without yet setting a specific date.

The Fed cited "solid" recent job gains even as the outbreak of the Omicron variant of the coronavirus pushed daily case numbers to record levels, and said it continued to expect improvements in global supply chains to improve inflation.

Other risks have arisen in the weeks since the Fed's Dec. 14-15 policy meeting, with Western nations fearing a possible Russian invasion of Ukraine and investors selling off stocks.

But that did not detract from the Fed's urgency to lean against inflation that has hit multi-decade highs.

"Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation," the Fed said.

Policymakers did not release new economic and interest rate projections on Wednesday. In a news conference scheduled for 2:30 p.m. EST (1930 GMT), Fed Chair Jerome Powell is expected to continue bringing the central bank into line with public and market expectations that it will move more aggressively to temper consumer price increases that have hit 7% annually - the highest level since the 1980s.

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Reporting by Howard Schneider Editing by Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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Inflation-fighting Fed expected to signal March interest rate hike - Reuters
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