![]() ![]() Many Fed officials had been hoping to keep their policies very accommodative as those people came back.īut inflation is forcing policymakers to balance their job market ambitions with their goal of keeping price gains under control. ![]() Some of those people may have retired, but others are expected to return to the job search once health concerns and pandemic-related child-care problems become less pronounced. The unemployment rate has dropped sharply, falling to 4.2 percent in November and improving faster than Fed officials or most economist expected.Įven so, about four million jobs are still missing compared to before the pandemic. Progress on the second goal has also been notable in recent months. ![]() The Fed has two key jobs: keeping prices stable and fostering maximum employment. “They’re realizing that they need to stop pouring gasoline on the fire,” said Gennadiy Goldberg, a rates strategist at T.D. Policymakers have increasingly questioned the wisdom of adding juice to the economy with each passing month. The gains are broadening beyond pandemic-sensitive goods and into rent and some services, and both wages and inflation expectations are picking up. But gradualism has given way to wariness in recent weeks, partly thanks to a new series of data points showing that inflation is still high and might stay elevated for some time.Ĭentral bankers knew that prices would climb quickly in early 2021 as the economy recovered from the depths of the pandemic, but the increases have been strikingly broad-based and long-lasting. The Fed spent much of 2021 tiptoeing away from full-blast economic support, hoping to remove stimulus gradually enough that the job market would heal fully and quickly. The Fed chair is expected to further explain during a post-meeting news conference on Wednesday how he is thinking about the central bank’s policy stance as it confronts rapid inflation and an uncertain economic path at a time when the virus shows no signs of abating and a new variant, Omicron, complicates the outlook. Lifting the federal funds rate is arguably the Fed’s most powerful tool for pushing back on inflation, because it would slow demand and economic growth by percolating through the rest of the economy, lifting borrowing costs on mortgages, business loans and auto debt. When they last released the projections in September, officials were split on whether they would raise rates at all in 2022. Policymakers will also provide their latest thinking on the path for interest rates in their updated quarterly economic projections, and could pencil in two or three increases next year. Given inflation and growth trends, Fed officials signaled clearly that they would discuss withdrawing support more quickly at this gathering, and economists think officials will signal a plan to taper off bond purchases so that the buying will stop altogether in March. In the weeks since the Fed’s last meeting, fresh data has showed that consumer prices are climbing at the fastest pace in nearly 40 years and the unemployment rate has fallen to 4.2 percent, far below its pandemic peak. Officials took their first step toward weaning the economy off the central bank’s support in November, when they said they would begin to slow a large-scale bond buying program that had been in place since early in the pandemic to keep money flowing around markets and support the economy. ![]()
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