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Fed Expects US Inflation To Surpass Target Rate

The U.S. central bank has raised its forecast for the rate of price growth in the country during 2011 above the target set by policymakers due to a temporary increase in inflationary pressure, according to Financial Times.

The U.S. central bank has raised its forecast for the rate of price growth in the country during 2011 above the target set by policymakers due to a temporary increase in inflationary pressure, according to Financial Times. On Thursday, Federal Reserve announced that it now expects headline inflation to reach 2.1-2.8% during 2011 before returning to the official target of under but close to 2% in the following year. Chairman Ben Bernanke said that the Federal Open Market Committee “expects the effects on inflation of higher commodity prices to be transitory,” and the group forecast for price growth of 1.4-2% in 2012.

The chairman also painted a more detailed picture of the Fed’s policy over the coming months by offering his assurance that the $600 billion stimulus program would be completed in the second quarter, and that “we are going to do that pretty much without tapering.” Additionally, Bernanke said that the first fiscal tightening would be to end re-investments of early repayments from the Fed’s security portfolio, but that remains well in the future. According to The Daily Telegraph, economists like David Sloan of IFR Economics noted that policymakers were “a little more concerned about rising inflation” and “slightly less upbeat” on the outlook for the economy.

Click here to read the story on Bernanke's comments from Financial Times.

Click here for coverage of economists' reaction from The Daily Telegraph.

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