Anticipated FOMC Policy, Inflation and Credibility

Abstract: Following through on its September 2020 plan, the FOMC waited to raise interest rates until March 2022, when inflation was high and unemployment was below its perceived long-run level. However, by early fall 2021, markets were predicting a rate increase, and policymakers were signaling an increase in their Summary of Economic Projections. In contrast to the 1980s and 1990s, when the Fed fought inflation scares even as actual inflation trended down, long-term inflation expectations have been relatively stable even as actual inflation has risen far above target. This stability has likely been facilitated by the SEP reinforcing the Fed's commitment to its 2 percent inflation target.

Keywords: FOMC; interest rates; interest rate projections; inflation;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2022-09

Volume: 22

Issue: 37