The Federal Reserve will continue to reduce the monthly pace of asset purchases and bring them to an end in early March, according to the latest Federal Open Market Committee statement issued today. Fed Chairman Jerome Powell said inflation remains well above the Fed’s longer-run goal of 2% and that supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation.
In a press conference after the release of the FOMC statement, Powell said he does not expect supply chain issues to be completely worked out by the end of this year but does expect progress to be made in the second half of the year.
The committee also said it would continue to hold the target range for the federal funds rate at its current level of zero to 0.25%, but noted that they expect “it will soon be appropriate to raise the target range for the federal funds rate.” The FOMC reiterated that the path of the economy continues to depend on the course of COVID-19. The statement added that indicators of economic activity and employment have continued to strengthen and the sectors most adversely affected by the pandemic have improved in recent months but are now being affected by the recent sharp rise in COVID-19 cases.
The Fed also issued principles for how it plans to unwind its balance sheet, and reaffirmed its longstanding statement on its longer-run monetary policy goals, which target an inflation rate of 2%.