Source: CoStar - June 21, 2021.
Until this past week, the Federal Reserve policy-setting committee had been on autopilot, stressing it would hold to its extremely accommodative monetary stance until “substantial forward progress" has been made toward its maximum employment and price stability goals, and expecting to hold interest rates at near zero through the end of 2023.
But at its fourth meeting of the year, the Fed finally turned a corner.
Members took stock of the unusual conditions the economy is now facing as it reopens, where aggregate demand is jumping amid continued supply chain constraints and fueling inflation pressures. The headline from the meeting was that most members of the committee would now prefer to move the policy interest rate higher in 2023, rather than wait, as the previous consensus had been.
Despite that headline, the change was marginal, and as Chairman Jerome Powell noted during the meeting, “more important than any forecast is the fact that, whenever liftoff comes, policy will remain highly accommodative.” He made sure to also note the message that such a move would send, saying, “Reaching the conditions for liftoff will mainly signal that the recovery is strong and no longer requires holding rates near zero.”