The Federal Reserve acknowledges that inflation is higher than expected and is preparing for long-term consequences.


The Federal Reserve acknowledges that inflation is higher than expected and is preparing for long-term consequences.

According to the Associated Press, officials recognized that the rise in prices across the economy has been larger than expected and repeated their view that the inflation will be temporary in minutes released Wednesday from a Federal Reserve meeting earlier this month.

The Fed voted to begin retraction of the support packages implemented last year to lift the economy out of the pandemic slump during its meetings on November 2 and 3.

The Fed will reduce the amount of Treasury bonds and mortgage-backed securities it buys to keep long-term interest rates low, according to the vote.

Officials also stated that the Federal Reserve “would not hesitate” to change its activities in response to inflation and the potential harm it could do to the economy in the minutes.

The purchases are less required now that the economy is recovering from the pandemic, according to Fed Chairman Jerome Powell, and lowering them could help to balance the inflation and price surges that have happened across the country in recent weeks.

The Fed had been buying $120 billion in bonds and securities, and had approved a $15 billion cut in November and another $15 billion in December, with the expectation that the program would be phased out once the total amount reached zero in June.

They also stated that based on the present status of inflation throughout the economy, the amount cut each month could be increased or decreased.

Inflation has soared to levels not seen in decades in several sectors of the economy, from gas costs to the cost of items at the supermarket. These price hikes, according to Powell and other officials, will only be temporary as supply chain concerns are rectified around the world once the pandemic has passed.

See the following links for further Associated Press reporting:

However, the Fed minutes revealed a growing concern that the unwelcome price pressures could persist for longer, and that the Fed should be prepared to reduce bond purchases more quickly or even begin raising the Fed’s benchmark interest rate sooner to prevent inflation from spiraling out of control.

“Several participants suggested that the committee be prepared to make changes. This is a condensed version of the information.


Leave A Reply