The Federal Reserve of the United States on Wednesday advanced its projections for the first interest rate hikes after the pandemic towards 2023, citing a better health situation and eliminating a usual reference that the crisis was weighing on the economy.
The new projections saw a majority of the 11 Fed officials leaning toward at least two quarter-point interest rate hikes by 2023, but in their statement they pledged to maintain the policy of support for now to foster the recovery. of current employment.
“Advances in vaccination have reduced the spread of COVID-19 in the United States,” the US central bank said in a statement after its last monetary policy meeting, a substantial change for an institution that has conditioned its stance for the past 14 months into the fight against the pandemic.
The Fed reiterated its promise to wait for “further substantial progress” before beginning to shift to policies less geared to the coronavirus pandemic and more to a fully open economy.
The new wording doesn’t mean a change in monetary policy is imminent: The Fed on Wednesday kept its short-term benchmark interest rate near zero and said it will continue to buy $ 120 billion in bonds each month to fuel the economic recovery.
But the new economic and interest rate projections seem to add some urgency to the Fed’s planning. The median estimates of monetary policymakers now consider that the first rate hike will occur in 2023, rather than 2024. .
The projections showed that the inflation outlook increased this year, although the price increase was still described as “transitory”. Overall economic growth is expected to reach 7%.
Taken together, the projections were indicative of a faster-than-anticipated recovery, and warrant discussions about the next phase of the Fed’s monetary policy.
