“Progress on vaccinations has reduced the spread of Covid in the US,” the Federal Open Market Committee said on Wednesday following the conclusion of its two-day policy meeting. “Amid this progress and strong policy support, indicators of economic activity and employment have strengthened.”
The central bank held the target range for its benchmark policy rate unchanged at zero to 0.25% — where it’s been since March 2020 — and pledged to continue asset purchases at a $120-billion monthly pace until “substantial further progress” had been made on employment and inflation.
The quarterly projections showed13 of 18 officials favoured at least one rate increase by the end of 2023, versus seven in March. Eleven officials saw at least two hikes by the end of that year. In addition, seven of them saw a move as early as 2022, up from four. The dollar rose, stocks declined and yields on 10-year Treasuries jumped. The FOMC vote was unanimous.
The US economic recovery is gathering strength as restrictions lift and social activity increases. Robust demand from consumers and businesses alike has outstripped capacity, leading to bottlenecks in the supply chain, longer lead times and higher prices. At the same time, employment growth has disappointed over the past couple of months.