Powell Fights to Walk Back Fed’s Inflation Fear
The central bank may still cite “transitory factors,” but the dot plot says something different.
Jerome Powell sought to downplay any concerns about tighter policy, but more Fed officials are starting to lean hawkish.
Photographer: Michael Nagle/BloombergFederal Reserve Chair Jerome Powell made an almost lawyerly case last month that the sharp pickup in U.S. inflation was temporary. Judging by the central bank’s latest decision, he hasn’t yet managed to persuade his fellow Fed officials.
Policy makers signaled through their updated “dot plot” forecast of the fed funds rate that they’re evenly divided about whether to raise the short-term benchmark next year. That’s a shift from June, when 11 of 18 officials expected to leave it unchanged in the current range of 0% to 0.25%. What’s more, the median expectation is now for the rate to climb to 1% and 1.75% at the end of 2023 and 2024, respectively. Depending on when liftoff from the zero lower bound actually happens, that implies a tightening path that isn’t much different from the gradual pace of the last cycle, even though the Powell-led Fed has gone to great lengths to emphasize its new policy framework and its stringent requirements to raise interest rates.