But he struck in some more sophisticated tone in his monetary policy reform, saying he was “ready to adjust the monetary policy stance properly if risks arise.”
One of these risks could increase inflation, which the Fed expects to move forward in the coming months. Other risks could be public health, labor market and financial market conditions.
By December, prices will rise 2.4%, Fed officials predicted – slightly higher than their December estimate of 1.8% and slightly ahead of the central bank’s target of about 2%.
The statement was followed by a rally in stocks.
According to the Fed’s unanimous forecast – known as the dot plot – the central bank does not expect any rate hikes in 2021, but four Fed officials are projecting higher interest rates in 2022.
For now, the benchmark interest rate has remained in the range of zero to 0.25%.
But, while inflation could be a boom in the streets these days, high consumer prices will lead to a stronger economy. Fed officials said this year the U.S. Gross Domestic Product, a comprehensive assessment of the activity of the economy, is projected to be higher than the 2.2% estimated in December. The vaccine rollout is responsible for a bright economic future, along with the stimulus of Washington’s financial stimulus packages.
Meanwhile, the unemployment rate is expected to fall to 4.5%% by the end of the year, compared to the previous forecast %%. By February, the country’s unemployment rate was .2.5%.
That said, Powell reiterated that the overall unemployment rate does not reflect the total number of people who have stopped working due to the epidemic, including those who have left the labor force. Last month’s employment report also downplayed racial differences in the unemployment rate, with rates for people of color being significantly higher than white unemployment rates.
“It’s sad to see,” Powell told a news conference. “And this particular recession, of course, was a direct blow to the part of the economy in which many minorities and low-wage workers work.
By 2023, the unemployment rate will fall below 3.5%, according to the Fed consensus, the same rate that the job market had before the epidemic hit.
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