Federal Open Market Committee members said that they see the current elevated level of inflation as transitory but that it could take longer to subside than they had previously assessed. In minutes from the group’s Nov. 2-3 meeting released last week, members remarked that there are upside risks to inflation, including those associated with strong demand for goods and a tight labor market.
The near-term outlook for inflation was revised upward, as consumer food and energy prices have risen faster than expected and production bottlenecks and recent wage gains put greater upward pressure on prices than had been expected.
Participants said they continue to anticipate that the inflation rate will diminish significantly in 2022 as supply and demand imbalances abate, but added that uncertainty regarding this assessment has increased. Some members also expressed concern that an upsurge in COVID-19 cases during the coming winter or an emergence of new virus strains would damp economic activity and intensify price pressures.