US Federal Reserve expects higher inflation in 2021

by The Istanbul Post


The US Federal Reserve increased its inflation expectation for 2021, according to projections released Wednesday after it kept its benchmark interest rate unchanged at the end of a two-day meeting.

The central bank expects personal consumption expenditures (PCE) inflation to come in at 3.4%, up from a 2.4% estimate made in March.

Its PCE inflation forecast was also increased 0.1 percentage point to 2.1% and 2.2% for 2022 and 2023, respectively.

The Fed raised its economic growth forecast to 7%, up from a 6.5% estimate made in March.

But the central bank did not change its unemployment forecast, which is anticipated at 4.5%.

Although the Fed kept repeating it would not raise its benchmark interest rate until full employment is achieved, it may be forced into a rate hike to tame rising inflation.

As for federal funds rate projections, the Fed indicated interest rates will increase in 2023, according to its “dot plot” that shows projections of the 12 members of the Federal Open Market Committee.

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