If the economy continues to improve broadly, “a moderation in the pace of asset purchases may soon be warranted,” the Federal Open Market Committee said today. Since last December, the economy has made progress towards the committee’s goals of maximum employment and price stability, and the committee said it expects that progress to continue.
The target range for the federal funds rate will stay at zero to 0.25%, the committee said, adding that it expects it will maintain that range until inflation has risen to 2%, is on track to moderately exceed 2% and maximum employment is reached.
Meanwhile, elevated inflation will likely remain in the coming months before moderating, Federal Reserve Chairman Jerome Powell said in a press conference after the release of the FOMC statement. He added that supply chain bottlenecks have been larger and longer lasting than anticipated and have led to upward revisions to inflation projections for this year.
“The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic,” said Powell. “As the reopening continues, bottlenecks, hiring difficulties and other constraints could again prove to be greater and longer-lasting than anticipated, posing upside risks to inflation.”
The sectors of the economy most affected by the pandemic have improved recently but a rise in COVID-19 cases have slowed their recovery, the FOMC added. “The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain,” the committee said.