The Federal Reserve decided Wednesday to maintain the existing federal funds rate of between zero and 0.25% amid rising inflation. The Federal Reserve also forecasted three interest rate hikes next year, followed by further increases in 2023 and 2024. A statement on the decision reads: “Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
The Federal Reserve’s Federal Open Market Committee (FOMC) announced it would slowly begin curtailing the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities, anticipating “similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.”
The FOMC acknowledged positive job gains in recent months and declining unemployment rate. But it also added that “supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
Editorial credit: Paul Brady Photography / Shutterstock.com