WASHINGTON – The Federal Reserve is likely to reaffirm its plans to maintain easy monetary policies so that the U.S. economy recovers further from the effects of the coronavirus pandemic, while at the same time taking note the positive outlook for growth.
Fed officials are expected to conclude Wednesday’s two-day meeting by releasing a policy statement and their updated projections for economic growth, unemployment, inflation and interest rates in the coming years. Chairman Jerome Powell raises questions at a postmeeting press conference.
Mr Powell and his colleagues have reiterated that the central bank will have overnight interest rates close to zero until the economy reaches its highest earnings and will withstand 2% inflation – conditions that are not expected to achieve this year. The Fed also plans to continue to purchase at least $ 120 billion a month in Treasury debt and mortgage-backed securities to make “further progress” towards these goals.
Federal Reserve Chairman Jerome Powell tells WSJ’s Nick Timiraos that there is no plan to raise interest rates so that labor market conditions are consistent with the highest employment rate and inflation is stable at 2%. Photo: Eric Baradat / Agence France-Presse / Getty Images.
Private economists have recently raised their forecasts for 2021 economic growth and inflation as a result of the Covid-19 vaccine promotion and the $ 1.9 trillion stimulus package signed into law by the President Biden last week. They also lowered their unemployment projections this year.
Economists told the Wall Street Journal this month that US GDP growth is close to 6% this year, projected from the fourth quarter of last year to the same period this year – the fastest rate since the 7.9% explosion in 1983.
Since their February forecasts, economists’ forecasts for inflation have moved up nearly half a percentage point, and have moved down nearly half a percentage point for the unemployment rate.
The labor market has strengthened this year. Employers added 379,000 jobs in February, up from January gains and the December recession. The unemployment rate fell to 6.2% last month from 6.3% in January.
U.S. retail sales fell 3% in February after jumping 7.6% in January, as households began receiving the incentive payments agreed by Congress and the White House in December. Sales rose 6% over the past three months compared to the same period a year ago, according to the Commerce Department.
Partly reflecting the improving economic outlook, yields on 10-year Finance notes, which will affect long-term borrowing costs for businesses and households, have risen in the last few weeks to highest level since February 2020 – before the pandemic hit the U.S. economy. Rates on 30-year mortgages rose above 3% this month for the first time since July.
Fed officials have said they expect inflation to rise above their 2% target this year due to temporary reasons that are unlikely to change monetary policy.
After a decade of largely inflation running below that target, policymakers last year decided to end their long-term strategy of raising interest rates to be above average. higher inflation. Instead they will test periods of inflation above the target after periods of inflation below the target.
They now expect rates to rise until inflation hits 2% and is expected to go above that level for some time. Officials have not said how high or how long they would allow inflation to run above 2%.
Write to Paul Kiernan at [email protected]
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