Federal Reserve (Fed) Chairman Jerome Powell and other Fed members continue to project near-zero interest rates at least until 2023 despite an improving U.S. economic outlook as well as the emergence of inflationary concerns in financial markets.
Seven out of 18 officials forecast higher rates by the end of 2023 compared to 5 out of 17 at the December meeting, indicating a larger group is seeing a loose monetary policy pullback, according to new quarterly projections from the Fed.
The Fed expects the increase in inflation this year to be only temporary. Officials see the price pressure measure option will slow to 2% next year after rising to 2.4% this year, according to projections made. Excluding energy and food, inflation is forecast to hit 2.2% this year and fall to 2% in 2022.
Asked about the increase in treasury returns, Powell rejected the idea that the Fed should follow the market, instead saying the current stance of Fed policy, including the asset purchase program, is reasonable.
Substantial fiscal assistance as well as widespread vaccinations will help reopen the economy have boosted investor expectations of rising rates and inflation, in turn causing treasury returns to increase with the central bank and federal government continuing to create economic stimulus.
The federal funds benchmark rate range was maintained at 0%-0.25%, as it was last March. The FOMC decision on Wednesday was unanimous.