Federal Reserve officials forged ahead with an interest-rate increase and additional plans to tighten monetary policy despite growing concerns over weak inflation.
The Fed’s actions and words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year.
Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5 trillion balance sheet this year. In a press conference after the decision was announced, Fed Chair Janet Yellen said the unwinding plan could be put into effect “relatively soon” if the economy evolves as the central bank expects.
“Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. “The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.”
Policy makers also issued forecasts showing another three quarter-point rate increases in 2018, similar to the previous projections in March.
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