The Federal Reserve Chain expects the inflation rate to increase in the short-term and start reducing towards the target of 2% when supply imbalances ends.
- In the last few months, inflation rates rose as the reopening of the economy led to increased spending and increase in oil prices.
- A majority of Fed Officials supported an increase in interest rates by the close of 2023. The forecasts also depict a sense of risk and uncertainty relating to inflation rate increasing higher.
- The signals of the Federal Reserve on inflation vigilance had short-term impact on the financial markets, increasing short-term rates and stagnating long-term yields.
Powell is still optimistic on the improvement of the employment situation. As vaccinations continue to increase Fed officials Bullard and Kaplan argued that the FED might consider tightening the monetary policy sooner.
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