Federal Reserve Chair Jerome Powell on Wednesday avoided setting any firm deadlines for when the central bank would hike rates in 2022 but hinted that the first one might be coming in March.
"The committee is of a mind to raise the Fed Funds Rate at the March meeting," Powell said.
Beyond that, Powell was non-committal about when and by how much the hikes would occur.
"It is not possible to predict with much confidence exactly what path for our policy rate is going to prove appropriate," he said.
He explained that the central bank plans to gradually tighten monetary policy over the span of the year through a combination of rate hikes and a steady reduction in the Fed's $9 trillion balance sheet.
Powell said he still sees rate hikes as the Fed's primary tool for fighting inflation, and that balance sheet tightening would mostly take place in the background in a gradual and predictable fashion.
"We have a much better sense, frankly, how rate hikes impact the market," he said.
In order to prepare markets for how tightening might work, the Fed released a set of guiding principles, which, nonetheless, avoided putting forth a timeline for how fast the reduction could take place.
Overall, the Fed tried to balance transparency about its monetary goals for the year while still giving itself maximum flexibility to respond to the ongoing economic impact of the COVID-19 pandemic.
Powell stressed that inflation was well above expectations and that it was time for the Fed to begin a shift away from its accommodative stance.
"The economy no longer needs sustained high levels of support," he said.
At the same time, the Fed Chair stuck to the narrative that a good portion of recent price increases is related to supply constraints, which could ease in the coming year. "There are multiple forces that should be working over the course of the year for inflation to come down," he said.
One thing the FOMC statement did make certain is that monthly asset purchases — or quantitative easing — will finish up in March as planned.
The Fed has long signaled that rate hikes would come after fully tapering asset purchases.
In so many words, the Fed appears to be sticking to that plan.
"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.