The Federal Reserve emerged from its Open Market Committee meeting this week with the status quo intact, along with some changes to the future timeline. The Fed will keep its benchmark interest rate at 0 to 0.25 percent, and will continue its bond-buying program to the tune of $80 billion per month. "These measures will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete," said Fed Chair Jerome Powell following the announcement.
Still, the Fed addressed the elephant in the room---rising inflation. "Inflation has increased notably in recent months...and will likely remain elevated in coming months," said Powell. The Fed maintains that this inflation is transitory due to the economic recovery from the pandemic, and not a major long-term concern.
KTRH Money Man Pat Shinn with Heritage Asset Advisors believes the Fed did a good job of walking the tightrope between encouraging economic growth and assuaging investor concerns. "They needed to say something about inflation, because over the last couple of weeks we've seen some very big inflation numbers," he tells KTRH. "They don't think this is going to be long-lived, but they had to acknowledge it."
The Fed also moved up the timeline for eventual interest rate increases, after previously signaling rates would stay near zero through 2023. "There will be no increase in the overnight lending rate this year, no increase next year, but then in 2023 they are forecasting two rate hikes," says Shinn.