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The chair of the Federal Reserve (Fed), Jerome Powell, admitted Wednesday that inflation in the country is already widespread in all sectors, and predicted that it will remain above the institution’s target of 2% until well into 2022.
This was stated by Powell at a press conference following the agency’s monetary policy statement, which left interest rates unchanged in the range between 0% and 0.25% and accelerated the pace of the reduction of its bond-buying program precisely to combat inflation.
The Fed had so far pointed out that the rise in prices had been mainly affected by the COVID-19 pandemic in certain sectors.
Following Wednesday’s decision, Powell said that the central bank is now expected to completely end its liquidity injection program in mid-March as part of the monetary stimulus initiated in the wake of the coronavirus crisis.
Powell also reiterated the idea that there will be no interest rate hikes until the stimulus has been fully withdrawn.
In addition to accelerating the pace of stimulus withdrawal, the Fed lowered economic growth forecasts to 5.5% this year, four-tenths less than in September; while it raised inflation forecasts to 5.3%, compared to the 4.2% previously estimated.
For 2022, however, the central bank estimates that inflation will moderate to 2.6%, four-tenths less than calculated in September; and forecasts that growth will be 4%, two-tenths more than expected.