With a single word — “transitory” — Federal Reserve Chair Jerome Powell has sprung the “dove trap,” leaving market participants wondering if the central bank will ever commit to its 2 percent inflation target.
The two-day Federal Open Market Committee meeting that ended Wednesday produced a statement that closely matched expectations. The Fed held the target range for short-term interest rates steady, justifying their “patient” strategy with weaker domestic demand and slower inflation. This outcome seemed consistent with growing concerns among policy makers about low rates of inflation. Those concerns gave rise to growing expectations of a rate cut this year.
