Heard on the Street: Easing of the pandemic, rather than a transitory rise in inflation, caused the Federal Reserve to shift its forecasts
Following its two-day meeting, the Fed’s policy-setting committee on Wednesday left its target range on overnight rates where it has been since the pandemic struck last year: right near zero. The most significant changes to the postmeeting statement from the previous one were an acknowledgment that vaccinations have reduced the spread of Covid-19 and an expectation that the effects of the economy’s crisis will continue to moderate.you could have easily missed it.
Other than that, the statement repeated the view that the recent rise in inflation largely reflects “transitory factors,” something that Fed Chairman Jerome Powell reiterated in his postmeeting press conference. They significantly raised their inflation forecasts for this year and very slightly raised them for 2022 and 2023. But they also bumped up their forecasts for economic growth. Now the median forecast calls for gross domestic product to be up by 7% in the fourth quarter from a year earlier versus an earlier projection of 6.5%, while the forecast for next year remains at a strong 3.3%.
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