The Federal Reserve today pulled forward its projection for the first post-pandemic interest rate hike into 2023, from its previous timeline of 2024 at the earliest. The Fed cited an improving economy and dropped its longstanding reference that the Covid-19 pandemic was weighing on the economy. The timeline shift regarding higher interest rates was not a surprise, with a growing number of economists taking note of inflationary signals. The Fed acknowledged inflation has risen, but it described it as “largely reflecting transitory factors.”
At the conclusion of the two-day meeting, the Federal Open Market Committee decided to keep interest rates near zero (0.00% to 0.25%) and to maintain their monthly purchases of about $120 billion in Treasury and mortgage bonds “to foster smooth market functioning and accommodative financial conditions.”
The FOMC says it is prepared to adjust monetary policy “as appropriate if risks emerge,” taking into account “a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”