Recently, the Federal Reserve massively increased its inflation expectations but has refused to back down from its aggressive monetary stimulus.
During its eagerly anticipated June meeting, the central bank stated that the inflation is “transitory” in its nature as the United States begins to free itself from COVID-19 and recession brought on by all of the pandemic lockdowns. While the Federal Open Market Committee seeks to aim for a stable inflation rate for the long term, it increased its projections about inflation for 2021 to around 3.4%, which is almost an entire percentage point higher than its most previous inflation forecast.
The statement released by the Fed reads:
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.
However, the Fed will still push and promote a close to zero interest rate and purchasing Treasury bonds:
The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.
Upon making note of the Unites States’ increasingly successful distribution of COVID-19 Vaccines, the Fed substantially improved the expectations for American real GDP growth from around 6.5% to 70% in 2021. It issued no changes to its projection of a close to 4.5% near-term unemployment rate.
The Fed also seeks to extend its “temporary U.S. dollar liquidity swap lines with nine central banks through December 31, 2021” for the purpose of promoting the “supply of credit to households and businesses, both domestically and abroad.”
As we see the recovery of the economy of the nation, the United States is seeing its largest rise in inflation since the Great Recession. A poll that was recently taken has unveiled that most American voters, even crossing party lines, are blaming Ole’ Uncle Joe for this spike in inflation.