WASHINGTON, June 16 (Xinhua) -- The U.S. Federal Reserve on Wednesday kept its benchmark interest rates unchanged at the record-low level of near zero, as the economic recovery continues amid growing concerns over inflation surge.
"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," the Fed said in a statement after concluding its two-day policy meeting.
The Fed noted that the sectors most adversely affected by the pandemic "remain weak but have shown improvement."
With inflation having run persistently below the 2-percent longer-run goal, the Federal Open Market Committee (FOMC) 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, the Fed reiterated.
At a virtual news conference Wednesday afternoon, Fed Chairman Jerome Powell said inflation has come in "above expectations" over the last few months, but over time, it seems likely that these specific things that are driving up inflation "will be temporary."
"We will see increases in supply over coming months, as the factors that we believe have been suppressing supply abate, wane, move down," Powell said, noting that the central bank is going to be looking at the monthly pricing data.
The Fed's latest decision came days after the U.S. Labor Department reported that consumer prices rose 0.6 percent in May, with a 12-month increase of 5 percent, marking the largest 12-month increase since the period ending August 2008.
Excluding the volatile food and energy categories, the so-called core consumer price index (CPI) rose 0.7 percent in May, following a 0.9-percent increase in April.
The index for all items excluding food and energy rose 3.8 percent over the last 12 months, the largest 12-month increase since the period ending June 1992, according to the Labor Department.
"If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we would be prepared to adjust the stance of monetary policy," said the Fed chair.
The central bank also pledged to continue its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until the economic recovery makes "substantial further progress."
Economists and analysts had predicted that Fed officials could begin debate on tapering the monthly asset purchases as soon as this week's policy meeting, and at the news conference, Powell was reluctant to send out signals on the plans to taper its bond buying program.
"I expect we will be able to say more about timing as we see more data, there is not more light I can shed on that. But think of the meeting as the talking about talking about meeting," Powell told reporters.
"At coming meetings, the committee will continue to assess the economy's progress toward our goals and will give advance notice before announcing any decision," he said, adding that the timing will depend on the pace of that progress, and not on any calendar.
Median forecast among Fed officials calls for a 3.4-percent inflation by end of this year, 1 percentage point up from the March projection, according to the Fed's latest Summary of Economic Projections released Wednesday.
Core personal consumption expenditures (PCE) price index is expected to rise to 3 percent by end of 2021, up 0.8 percentage point from March projection, and well above the Fed's 2 percent long-term goal.
Most Fed officials expect to raise interest rates by the end of 2023, with 13 out of the 18 FOMC meeting participates indicating that they expect at least one rate hike by the end of 2023, compared with 11 participates in the March forecast.
The economic projections also showed that two participates expect interest rates to reach 1.5 percent to 1.75 percent by the end of 2023.
At the press conference, Powell played down the significance of the dot-plot projections, saying that they need to be taken with a "big grain of salt."
"These are of course individual projections, not a committee forecast. They are not a plan," said the Fed chair.
"We did not have a discussion actually of whether lift off is appropriate at any particular year, because discussing lift off now would be highly premature, wouldn't make any sense," he said.
The main message from the economic projections, Powell said, is that many participants are more comfortable that the economic conditions in the committee's forward guidance will be met sooner than previously anticipated.
The Fed chief noted that rate increases are not the focus of the committee. "The focus of the committee is the current state of the economy, but in terms of our tools, it's about asset purchases. That is what we are thinking about," he said.
"Lift off is well into the future, the conditions for liftoff are far from maximum employment for example, it is a consideration for the future," he continued.
"We are not out of the woods at this point. It would be premature in my thinking, premature to declare victory," Powell said, adding that he would encourage people to continue to get vaccinated.
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