Why the Fed’s Inflation Forecasts Affects You

Photo by Frederick Warren on Unsplash

There is no denying that the price of every product we buy is continually rising, from gas to food.

Due to fewer restrictions in almost every state, companies are raising their prices to meet rising demand.

This Wednesday, the Fed’s announced that at least two rate hikes will occur by 2023, despite saying in March that it would not raise interest rates until at least 2024.

Companies continue to increase prices, so the Fed generally raises interest rates in an attempt to cool the economy.

However, Fed officials continue to believe that any hike in consumer prices is only temporary despite forecasting higher inflation.

Jerome Powell, Fed Chairman, even emphasized that borrowing costs would remain low for a long time.

The Fed said in its statement, “Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.”

Even though Powell’s outlook has changed from when he made it public in March, he still views the overall economy positively, stating, “We’re going to have a very strong labor market pretty quickly in the near future, and policy will remain highly accommodating.”