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Economy in Brief

FOMC: Fed Holds Funds Rate Near Zero; Raises Inflation Projection
by Tom Moeller  June 16, 2021

The Federal Reserve left the target for the Fed funds rate in a range of 0.0% to 0.25% at today's meeting of the FOMC. The statement accompanying the meeting indicated, "Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened."

Current Last 2020 2019 2018 2017
Federal Funds Rate Target 0.0% - 0.25% 0.0% - 0.25% 0.38% 2.17% 1.82% 1.00%

Also at today's meeting, the Fed updated its economic projections. The most notable change was the increase in estimated price inflation for 2021.

%

2020 2021 2022 2023
Real GDP (Q4/Q4) -2.4% 7.0% (previously 6.5%) 3.3% (previously 3.3%) 2.4% (previously 2.2%)
PCE Inflation (Q4/Q4) 1.2% 3.4% (previously 2.4%) 2.1% (previously 2.0%) 2.2% (previously 2.1%)
Core PCE Inflation (Q4/Q4) 1.4% 3.0% (previously 2.2%) 2.1% (previously 2.0%) 2.1% (previously 2.1%)
Unemployment Rate (year-end) 6.7% 4.5% (previously 4.5%) 3.8% (previously 3.9%) 3.5% (previously 3.5%)

It went on to say, "The sectors most adversely affected by the pandemic remain weak but have shown improvement. 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."

The statement also indicated, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer term inflation expectations remain well anchored at 2 percent."

As stated at the last meeting, it will "increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals."

The statement issued following today's meeting can be found here.

Today's action was supported by all Committee members.

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