Federal Reserve officials did not raise interest rates Wednesday, but signaled the central bank will do so soon as higher inflation persists.
"With inflation well above 2% and a strong labor market, the committee expects it will soon be appropriate to raise the target range for the federal funds rate," the Federal Open Markets Committee said in a statement at the end of its two-day meeting.
The Fed has kept the target range for the federal funds rate near zero since March 2020.
Also, the Fed said its asset-buying program is projected to end in early March. In response to the COVID-19 pandemic in early 2020, the Fed established monthly bond purchases — $80 billion in Treasury securities and $40 billion of mortgage-backed debt.
In a press conference Wednesday, Federal Reserve Chairman Jerome Powell said the economic outlook remains uncertain. "Making appropriate monetary policy in this environment requires humility, recognizing that the economy evolves in unexpected ways," he said.
The path of the economy depends largely on the course of the virus, Mr. Powell added. Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation, the committee noted in its statement.
"Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation," Mr. Powell said. "In particular, bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term. The problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus."
Both Mr. Powell at the press conference and the committee in its statement said the Fed is prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede its goals. In assessing the appropriate stance of monetary policy moving forward, the committee said it would evaluate a wide range of information, including readings on public health, labor market conditions, inflation pressures and expectations, and financial and international developments.
The FOMC's next meeting is March 15-16.
