WASHINGTON — The pace of the U.S. economy's recovery from the pandemic has officials with the Federal Reserve sharing new concerns over inflation.
To date, the Fed has played down any concerns over inflation, calling price increases temporary and in-line with historical performance following recessions and slowdowns. The Fed has to date continued to indicate it plans to keep rates low well into 2022.
But while just-released minutes from the Fed’s April 2021 meeting reaffirmed the view that the central bank believes ultra-low interest rates remain the best policy approach, some officials have started to caution that certain factors pushing inflation higher may not be resolved quickly.
The minutes reveal a number of participants in the discussions expressed a view that supply chain bottlenecks and input shortages that were pushing prices higher may not be resolved quickly and could end up putting “upward pressure on prices beyond this year.”
As the New York Times noted, the minutes “marked the first time the central bank has even hinted that the time could be approaching to consider reducing the Fed’s $120 billion monthly bond purchases. The purchases have the effect of putting downward pressure on long-term interest rates.”
“A number of participants suggested that if the economy continued to make rapid progress toward the committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the minutes state.
No Timeline
After the Fed concluded its April meeting, Fed Chairman Jerome Powell told a news conference that the Fed was not even “thinking about thinking about” trimming its bond purchases.
The Fed minutes do not indicate any type of timeline for potential rate increases.
And even though some Fed officials expressed concerns over the price increases, the minutes indicate the Fed believes longer-term expectations about inflation remained well anchored at levels broadly in line with the goal of annual price increases hitting the Fed's 2% target, after rising for a short period above that level.
At its April meeting, the Fed kept its benchmark rate at a record low of 0% to 0.25%, where it has been since March 2020. The Fed will next meet on June 15-16.