Ottawa injects another $36M into vaccine injury compensation fund
The federal government has added $36.4 million to a program designed to support people who have been seriously injured or killed by vaccines since the end of 2020.
The U.S. Federal Reserve said Wednesday that it will "soon" be time to start raising interest rates, a key step in reversing pandemic-era policies that have fuelled hiring and growth but also high inflation.
The Fed is expected to lift its benchmark short-term rate from zero as soon as March, when it also plans to phase out monthly bond purchases that have been intended to anchor longer-term rates.
Chair Jerome Powell said at a news conference that these actions will help prevent high inflation from becoming entrenched and that the central bank can manage the process in a way that prolongs economic growth and keeps unemployment low.
"I think there is quite a bit of room to raise interest rates without threatening the labor market," Powell said.
The Fed's rate hikes will make it more expensive, over time, to borrow for a home, car or business. The Fed's intent is to temper economic growth and cool off inflation, which is at a 40-year high and eating into Americans' wage gains and household budgets, without raising unemployment.
"The best thing we can do to support continued labor market gains," Powell said, "is to promote a long expansion, and that will require price stability."
The central bank's latest policy statement follows dizzying gyrations in the stock market as investors have been gripped by fear and uncertainty over just how fast and far the Fed will go to reverse its low-rate policies, which have nurtured the economy and the markets for years.
The broad S&P 500 index fell nearly 10% this month before rebounding slightly Wednesday.
Asked about the stock market's wild volatility, Powell stressed that the Fed's "ultimate focus" is on the "real economy." But he added: "We feel like the communications we have with market participants and the general public are working. Monetary policy works significantly through expectations."
High inflation has become a serious political threat to U.S. President Joe Biden and congressional Democrats, with Republicans pointing to rising prices as one of their principal lines of attack as they look toward the November elections.
Biden said last week that it was "appropriate" for Powell to adjust the Fed's policies. And congressional Republicans have endorsed Powell's plans to raise rates, providing the Fed with rare bipartisan support for tightening credit.
"The risk is for a faster pace of Fed tightening given the stickiness of inflation," said Kathy Bostjancic, an economist at Oxford Economics, a consulting firm. "Chair Powell's hawkish tone reflected the upside risks to inflation."
In the statement it issued Wednesday after its latest policy meeting, the Fed said it "expects it will soon be appropriate" to raise rates. Though the statement didn't specifically mention March, half the Fed's policymakers have expressed a willingness to raise rates by then, including some members who have long favored low rates to support hiring.
The Fed also set out principles it will follow once it decides to reduce its nearly US$9 trillion in bond holdings, a sum that has more than doubled since the pandemic struck nearly two years ago. Some analysts expect the Fed to begin doing so as soon as July, a move that would contribute to tighter credit.
The central bank faces a delicate and even risky balancing act. If the stock market is engulfed by more chaotic declines, economists say, the Fed might decide to delay some of its credit-tightening plans. Modest drops in share prices, though, won't likely affect the Fed's thinking.
Some economists have expressed concern that the Fed is already moving too late to combat high inflation. Others say they worry that the Fed may act too aggressively. They argue that numerous rate hikes could unnecessarily slow hiring. In this view, high prices mostly reflect snarled supply chains that the Fed's rate hikes are powerless to cure.
This week's Fed meeting comes against the backdrop of not only high inflation -- consumer prices have surged 7% in the past year -- but also an economy gripped by another wave of COVID-19 infections.
Powell has acknowledged that he failed to foresee the persistence of high inflation, having long expressed the belief that it would prove temporary.
The inflation spike has broadened to areas beyond those that were affected by supply shortages -- to apartment rents, for example -- which suggests it could endure even after goods and parts flow more freely.
The federal government has added $36.4 million to a program designed to support people who have been seriously injured or killed by vaccines since the end of 2020.
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