Political | Process

Fed Chair Jerome Powell says the pace of inflation is uncomfortably high, after the end of the Fed’s latest two-day policy meeting.

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• The scenario laid out by the central bank in its new policy statement and economic projections envisions the pandemic, despite the spread of the Omicron variant, giving way to a particularly benign set of economic conditions – a “soft landing” in which inflation eases largely on its own, interest rates increase comparatively slowly, and the unemployment rate is pinned to a low 3.5% level for three years.

• “This is a forecast that implicitly has favorable developments that allow them to leave accommodation but get favorable inflation,” said Vincent Reinhart, chief economist at Dreyfuss & Mellon, noting that the three-year rate hike cycle projected by Fed officials never reaches levels that would be considered restrictive, yet inflation is still expected to fall.

• The core of Fed officials thinks so. In their new economic projections, policymakers forecast that inflation would run at 2.6% next year, an increase over the 2.2% they projected in September, but then fall to 2.3% in 2023 and 2.1% in 2024.

• Unemployment is seen dropping to 3.5% next year, well below the point Fed officials feel is sustainable in the long run, and remaining there through 2024.

SOURCE: REUTERS