“The Fed, as expected, raised its benchmark rate to a range between 1 percent and 1.25 percent, citing the continued strength of job growth and dismissing, for now, the renewed weakness of inflation,” Appelbaum reports. “‘The labor market has continued to strengthen,’ the Fed said in an upbeat statement published after a two-day meeting of its policy-making committee. The Fed added that economic growth ‘has been rising moderately so far this year.'”
“The Fed’s statement did acknowledge that inflation has weakened in recent months, which has forced the Fed to concede that it has once again been wrong about inflation. Fed officials now predict that prices will rise by just 1.6 percent this year, down sharply from their forecast of 1.9 percent in March. They continued to predict 2 percent inflation next year,” Appelbaum reports. “The Fed in recent years has been equally consistent in predicting 2 percent inflation, and in being wrong.”
“The combination of strong job growth and weak inflation appeared to be the reason for the reappraisal,” Appelbaum reports. “Fed officials continue to adjust their estimates of how low unemployment can go. Some officials now predict the unemployment rate could fall below 4 percent – the lowest level in a generation.”
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MacDailyNews Take: “The Fed in recent years has been equally consistent in predicting 2 percent inflation, and in being wrong.”