Fed: Economic Risks Remain Even as Vaccinations Reduce Effects of Pandemic

Risks to the economic outlook remain even as progress on vaccinations will likely continue to reduce the effects of the coronavirus pandemic, the Federal Open Market Committee said today, adding that the path of the economy will significantly depend on the course of the virus.

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 supply bottlenecks from a rebound in spending as the economy continues to reopen have been larger than expected.
“Supply bottlenecks have limited how quickly production in some sectors can respond in the near term. These bottleneck effects have been larger than anticipated,” he said. “As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal.”