The Fed’s projections show that policymakers don’t expect inflation to hit that target until the end of 2023.
“The Fed is now more dovish, by a long shot, than it has ever been,” said Stephen Stanley, chief economist at Amherst Pierpont. Dovish means keeping borrowing costs low to support more hiring.
On Wall Street, stocks initially got a short boost from the Fed’s actions before turning lower. The S&P 500 fell 0.5%. Still, some market analysts liked what they heard from the Fed.
“A better economy and a dovish Fed, that is a nice combo,” said Ryan Detrick, chief market strategist for LPL Financial.
But many analysts were disappointed the Fed was not more specific about how long it wanted inflation to stay above 2%, one likely reason that the stock market ultimately fell.
Carl Tannenbaum, chief economist at Northern Trust, said the Fed will likely keep rates at nearly zero for at least five years. The Fed held its rate that low for seven years during and after the 2008-2009 recession.
The Fed ultimately first hiked rates in December 2015, when the unemployment rate was 5%. On Wednesday, the Fed projected that it will keep rates at zero in 2023 even as it forecasts unemployment will fall to 4%.
Powell said the Fed’s benchmark rate will stay low “until the expansion is well along, really very close to our goals and even after.”
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