Fed sees higher growth, above-target inflation this year, rates remaining steady

Fed sees higher growth, above-target inflation this year, rates remaining steady

News: Fed sees higher growth, above-target inflation this year, rates remaining steady.

WASHINGTON (Reuters) – The Federal Reserve on Wednesday forecast a rapid spike in US economic growth and inflation this year as the COVID-19 crisis eased, and reiterated its pledge to keep the target rate near zero for years to come .

The US Federal Reserve now expects the economy to grow 6.5% this year and the unemployment rate to fall to 4.5% by the end of the year, compared to a growth of 4.2% and unemployment of 5%, which was forecast at their meeting in December.

The pace of price hikes is now projected to surpass the Fed’s 2% target for the year, reaching 2.4% by year-end before falling back in 2022.

“The indicators of economic activity and employment have surfaced,” the Federal Open Market Committee, which set the policy, said in a statement that kept interest rates within a target range of zero to 0.25% overnight.

The improvement in the Fed’s economic outlook did not immediately change policymakers’ expectations for interest rates, although the weight of opinion has shifted. Seven out of 18 officials now expect rates to hike in 2023, compared to five in December.

Four officials now believe rates may need to rise as early as next year, a change from zero since last December forecasts.

Fed Chairman Jerome Powell was due to hold a press conference at 2:30 p.m. EDT (1830 GMT) to discuss the results of the last two-day political meeting.

The quarterly forecasts released on Wednesday were the first since the central bank’s December and include developments like the introduction of coronavirus vaccines and the approval of two federal spending totaling around $ 2.8 trillion. (This story corrects the projected growth rate from December estimates to 4.2% from 4.5%)

Reporting by Howard Schneider; Adaptation by Paul Simao

Original Source © Reuters

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