US Fed officials expect higher inflation this year
US Federal Reserve officials are expecting a higher inflation rate this year, 2.6 per cent measured by the Personal Consumption Expenditures price index, compared to the 2.4 per cent prediction they made in March. This is according to new projections the US central bank released on Wednesday.
They also expect the inflation rate excluding volatile components like food and energy — also known as core inflation — to be 2.8 per cent this year, which is higher than the levels they forecasted in March.
Officials further said they do not believe the unemployment rate would move above its current level of 4 per cent for the remainder of the year, a prediction they made back in March as well.
Following the conclusion of Wednesday’s Federal Open Market Committee meeting, Fed Chairman Jerome Powell stated that policymakers still do not believe it would be appropriate to cut the federal-funds rate until they have greater confidence that inflation is moving sustainably toward 2 per cent.
So far this year, Powell said the inflation data have not given officials that greater confidence yet, with progress remaining stalled in the first quarter.
“The most recent inflation readings have been more favorable than earlier in the year, however, and there has been modest further progress toward our inflation objective,” Powell stated.
“We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures.”
The US central bank chairman further noted that while Wednesday’s release of the consumer price index came in softer, that measure tends to run higher than the Fed’s preferred PCE price index.
“We welcome today’s reading and then hope for more like that,” Powell added. He further said that the economic outlook is “uncertain,” however, and Fed officials remain highly attentive to inflation risks.
