Fed Meeting: Analyzing Powell's Insights on Inflation and Economic Recovery
Fed Meeting: Key Insights from Powell's Speech
Powell devoted a section of his Friday morning keynote address at the Fed’s Jackson Hole Monetary Policy Symposium to discussing the drivers of inflation over the past few years—and the lessons learned.
Fed's Response to Inflation Trends
Fed officials looked past the pandemic-related distortions as inflation spiked in 2021, expecting that the reopening of economies would bring things back to normal.
“The good ship Transitory was a crowded one, with most mainstream analysts and advanced-economy central bankers on board,” Powell said. “The common expectation was that supply conditions would improve reasonably quickly, that the rapid recovery in demand would run its course, and that demand would rotate back from goods to services, bringing inflation down.”That didn’t play out entirely as expected. Inflation broadened out to services as the labor market heated up; new shocks emerged, including Russia’s invasion of Ukraine; and pandemic-era savings and stimulus payments kept consumer spending elevated.
Current Federal Reserve Policies
The Federal Open Market Committee—the Fed’s policy-setting body—only began to increase its federal-funds rate target in March 2022, with the consumer price index up 8.5% from a year earlier that month. The FOMC hiked a total of 5.25 percentage points by July 2023 and has held its target rate steady since then.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.