The Federal Reserve announced that it would keep interest rates steady at zero to one-quarter point for the moment, but it anticipates seeing two separate quarter point increases in 2023 because the US economy is rebounding from the pandemic faster than initially anticipated.
According to NBC News, Fed Chairman Jerome Powell stated that current inflation is being caused by temporary clogs in the supply chain that will abate over time. These problems are impacting things like lumber and car prices.
“This is an extraordinarily unusual time, and we really don’t have a template or any experience in a situation like this,” Powell said at a news conference after the meeting of the Board. “These very specific things that are driving up inflation will be temporary. High inflation readings will start to abate. There’s no reason for supply and demand to be out of whack.”
The Fed increased their expectation that inflation 2021 will hit 3.4%, up from 2.4% predicted during their March meeting. The Fed chair also noted that the Board started discussing easing back on the $120 billion in bonds it’s been buying monthly as a way to stimulate the economy.