Federal Reserve Acknowledges Higher Inflation, But Maintains Bond Purchases, Keeps Rates Near Zero

The Federal Reserve remained committed to its current monetary policy initiatives, despite recognizing an acceleration in the country’s economic recovery, and subsequent inflation expectations.

As was widely anticipated, the Fed has decided to leave the key interest rate near zero, while maintaining bond purchases to at least $120 billion per month. The central bank officials’ latest decision to not make changes to its approach comes amid a strengthening economy, and rising price pressures.

Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” said the Federal Open Market Committee (FOMC) in a statement following its policy meeting. “The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors.

Despite a number of figures showing continued improvement in America’s economy, Fed Chairman Jerome Powell said the recovery still remains “uneven and far from complete.” Although he noted that inflation pressures will likely continue to mount over the next several months, he once again reassured that any sort of inflation will only be temporary. “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses,” the FOMC committee reiterated.

Inflation has been steadily rising, with March consumer prices jumping 2.6%— marking the fastest year-over-year increase since August 2018. In the meantime, a number of household goods-producing companies have announced they will be raising prices on a number of consumer products, amid increasing input costs. Similarly, the ISM manufacturing PMI index registered at 85.6%, as all 18 industries noted higher prices for raw materials. In other words, prices are skyrocketing for the things consumers are actually buying.

Albeit, with a number of pressing signs suggesting inflation is here and will likely stay, the central bank reiterated its commitment to keep the benchmark rate at 0.25%, noting it will even allow inflation to exceed the 2% target until full employment is achieved. The Fed also repeated it would not change the pace of its bond purchases, which currently sits at $120 billion worth of bonds each month.

Following the news, 10-year Treasury yields jumped to the highest for the day, before paring back gains. The US dollar meanwhile fell to its low of the day.


Information for this briefing was found via the FOMC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

America Uses More Copper Than It Makes | Simon Quick – Canadian Copper

Gold Bulls Run Faster Than New Mines?! | Thomas Mumford – Scottie Resources

Is This the Start of a New Gold Rush | Russell Ashton – Juggernaut Exploration

Recommended

ESGold Secures $9 Million In Non-Dilutive Funding From Ocean Partners

Altamira Gold Encounters Porphyritic Intrusive Rocks In Initial Scout Drilling At Regional Targets

Related News

Jerome Powell: Rates Will Likely Be Higher Than Previously Expected

It appears Fed Chair Jerome Powell isn’t satisfied after all with the supposed “disinflationary process”...

Tuesday, March 7, 2023, 11:52:36 AM

Yield Curve Aggressively Inverts as Ongoing Fed Hikes Barrel Economy Into a Recession

The closely-watched Treasury yield curve dipped to the lowest level since the 1980s Volcker era,...

Saturday, November 12, 2022, 01:07:00 PM

Australia’s Central Bank Issues Unprecedented Apology for Misleading Mortgage Holders on Interest Rates

In a rare statement from a major central bank, the Reserve Bank of Australia (RBA)...

Tuesday, November 29, 2022, 06:31:00 AM

Stock Market Bubble Inevitable as Federal Reserve Continues Printing Trillions of Dollars

As the Federal Reserve continues to prop up various businesses and corporations across the US...

Tuesday, July 14, 2020, 01:10:12 PM

Federal Reserve Keeps Rates Unchanged But Plans for March Hike

The Federal Reserve has decided to keep interest rates unchanged for the time being, but...

Thursday, January 27, 2022, 10:04:00 AM