Led by gains in consumer spending, economic activity is expanding at a historically rapid pace, according to members of the Federal Open Market Committee. In minutes from the group’s June 15-16 meeting, a majority of members revised up their projections for real gross domestic product growth this year compared with projections from March on stronger consumer demand and improvements in vaccination rates.
Members noted that difficulty in hiring workers likely reflects factors such as early retirements, concerns about the virus, child care responsibilities and expanded unemployment insurance benefits. Inflation has increased more than the committee expected as supply constraints were more widespread and consumer demand larger than expected as the economy reopened.
Over the next year, the minutes show that the FOMC expects price increases caused by bottlenecks and supply constraints are expected to largely reverse and the growth in demand is forecast to ease. Inflation is projected to slow to slightly below 2% in 2022 before moving back up to a bit above 2% in 2023.