Fed Satisfies Inflation Hawks Without Lifting a Finger
Central bankers projected interest-rate increases well into the future that could be changed easily depending on economic conditions.
Fed Chair Jerome Powell would like to shelve “talking about talking about.”
Photographer: Susan Walsh-poll/AFP/Getty Images
The Federal Reserve’s June decision was viewed overwhelmingly as hawkish across any number of measures. And yet, when it comes down to tangible policy actions, the central bank barely lifted a finger.
The Federal Open Market Committee left the fed funds rate unchanged in a range of 0% to 0.25%, but, in a surprise to just about all market observers, policy makers signaled through their “dot plot” that they now expect two interest-rate increases by the end of 2023, up from a median expectation of zero in March. While the Fed’s statement didn’t tweak any wording around the pace of its asset purchases, it conspicuously removed the second sentence that had been included since April 2020: “The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world.” That reflects the reality of progress of getting Americans vaccinated and suggests that the emergency measures that have been in place for more than a year — such as $120 billion of monthly bond purchases — may soon no longer be necessary.