The economy continues to strengthen but still has a way to go before hitting the Fed’s employment and inflation targets, Federal Reserve officials said Wednesday.
“We’re not there,” Fed Chair Jerome Powell told reporters after a meeting of the Federal Open Market Committee. “And we see ourselves as having some ground to cover to get there.”
The committee said it would hold interest rates near zero and continue to purchase assets up to $120 billion a month until “substantial further progress” is made.
“With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered,” the committee said in a statement. “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.”
Fed watchers saw today’s announcement as a sign that officials are now beginning to think about reducing their support for the economy. “The Fed is starting the clock on tapering,” Neil Dutta, head of U.S. economics at Renaissance Macro Research, told Bloomberg. “It is not happening now or even in September, but expect the pace of asset buying to slow down late this year or early next.”
