Fed: Economic Activity Has Strengthened but Pandemic Still Weighs on Economy

Indicators of economic activity have strengthened recently as a result of progress on vaccinations but the COVID-19 pandemic still weighs on the economy, the Federal Open Market Committee said today.

The committee said that inflation has risen, “largely reflecting transitory factors,” and it will keep its target range for the federal funds rate at zero to 0.25% until inflation has risen to 2% and is on track to moderately exceed that for some time.

In a press conference after the release of the FOMC statement, Fed Chairman Jerome Powell said that readings on inflation are likely to rise further in the near future before moderating, partially due to supply bottlenecks from a rebound in spending as the economy continues to reopen. Powell added, “however, these one-time increases in prices are likely to have only transitory effects on inflation.”