Federal Reserve Leaves Policy Unchanged

Federal Reserve officials left policy unchanged on Wednesday but moved up expectations for when they would first raise interest rates from rock bottom, a sign that a healing labor market and rising inflation were giving policymakers confidence that they would achieve their full employment and stable price goals in coming years.

Fed policymakers expect to make two interest rate increases by the end of 2023, the central bank’s updated summary of economic projections showed Wednesday. Previously, the median official had anticipated that rates would stay near zero, where they have been since March 2020, at least into 2024.

The Fed now sees rates rising to 0.6% by the end of 2023, up from 0.1%.

The significant upgrade comes as the economy is healing, and as Fed officials penciled in stronger growth in 2021, faster inflation and slightly quicker labor market progress next year.

“Progress on vaccinations has reduced the spread of COVID-19 in the United States,” the Fed said in a statement released at the conclusion of its June 15-16 policy meeting, one that contained several optimistic revisions.

“Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.”