The Federal Reserve has never forecast U.S. inflation to rise by more than 2.2% in the following year since the 2007-2009 Great Recession. Until now.
The Fed on Wednesday lifted its forecast for U.S. inflation in 2022 to 2.6% from its prior estimate of 2.2%, a belated recognition that price pressures won’t dissipate as rapidly as senior officials once believed.See: Fed accelerates taper of bond-purchases, eyes three interest rate hikes in 2022
To be sure, Powell and most top Fed officials still think inflation will subside rapidly starting next year and return to pre-pandemic levels by 2024. They forecast inflation to slow to 2.3% in 2023 and 2.1% in 2024.The Fed announced on Wednesday it will ditch a bond-buying stimulus program for the U.S. economy much sooner than previously planned. The central bank plans to end the purchases by March instead of June.
“We’ve been adapting our policy,” Fed Chairman Jerome Powell said on Wednesday in defense of his approach.
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