In a new monetary policy statement, marking the end of the US central bank’s all-out battle against the coronavirus pandemic, The Fed stressed the enormous uncertainty it faces from the war in Ukraine and the ongoing health crisis, but still said “continued increases” in rates “will be appropriate” of federal funds to curb the highest inflation in 40 years.
The statement withdrew the direct reference to the coronavirus pandemic, but he cited the war in Ukraine as putting “additional upward pressure on inflation” and weighing on economic activity.
The trajectory of interest rates in the authorities’ new projections is tougher than expectedreflecting the Fed’s concern over inflation that has moved faster and threatens to be more persistent than anticipated, and jeopardizes the central bank’s hope of an easy exit from pandemic emergency policies.
Even with rate tightening expected now, inflation is expected to remain above the Fed’s 2% target, at 4.1% this year and falling to just 2.3% in 2024. forecast at 2.8% this year, a sharp drop from the 4.0% expansion projected in December.
The unemployment rate is now expected to fall to 3.5% this year, stay the same next year and rise slightly to 3.6% in 2024.
The new statement says the Fed expects to start reducing its nearly $9 trillion balance sheet “at an upcoming meeting,” a topic that Fed Chairman Jerome Powell will likely address at a press conference this afternoon.
St. Louis Fed President James Bullard was the only one who disagreed with the Fed’s decision.
Source: Ambito
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