US central bank refers to inflation as ‘temporary’
Hinting at meeting its inflation target, the Federal Reserve said on Wednesday it would end its pandemic-era bond purchases in March and pave the way for three quarter-percentage-point interest rate hikes through the end of 2022. Because it runs out of policies. Enacted at the beginning of the health crisis.
In new economic projections released after its policy meeting, Fed officials forecast inflation to run at 2.6% next year, compared to 2.2% projected in September, and the unemployment rate will fall to 3.5% — more than at full employment. When not.
Officials, on the median, estimated the Fed’s benchmark overnight interest rate would need to rise to 0.90% from its current near-zero level by the end of 2022. This would start a growth cycle that would see the Fed’s policy rate climb to 1.6. % in 2023 and 2.1% in 2024 – near but never higher than the level the Fed would consider restrictive of economic activity.
This is, in outline, a “soft landing” in that Fed officials expect US inflation to gradually ease in the coming years, while unemployment remains low in a growing economy.
The timing of the first increase, the central bank said, will depend entirely on the path of a job market, which is expected to continue to improve in the coming months.
Removed from the policy statement was any reference to inflation as “transient”, with the Fed instead acknowledging that price increases “for some time” exceeded its 2% target.
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