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The Federal Reserve’s latest set of projections foresees inflation as measured by core PCE prices falling to a 2% annual rate by the end of 2028.
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If the Fed’s assessment is accurate, inflation will have run above the Fed’s target for more than seven years.
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The projections highlighted the central bank’s struggles to wrestle inflation down to its target as tariffs push up consumer prices.
Federal Reserve Chair Jerome Powell once called the pandemic-era burst of high inflation “transitory.” Fed officials now expect it to last more than seven years from when it started.
That’s according to the latest set of economic projections released by Fed officials Wednesday, which foresaw a longer, harder fight against inflation than they did in June, the last time Fed officials made quarterly projections. Those projections had called for inflation to hit 2% at the end of 2027.
In a press conference Wednesday, Powell acknowledged that the goalposts have once again moved but noted that doing so is inherent in the economic projections. The FOMC members are supposed to pencil in the level of the fed funds rate that will stabilize inflation at a 2% annual rate in the long run.
“No one really knows where the economy will be in three years,” Powell said in response to a question from a reporter. “But the nature of the exercise is to write down policy that you believe would return to the 2% goal at least by the end of the exercise.”
The new projections highlighted the difficulty the Fed has had in fulfilling its mission of keeping inflation under control in the pandemic and post-pandemic eras. The central bank faces renewed challenges because President Donald Trump’s tariffs are beginning to push up consumer prices.
The Fed’s main tool for controlling inflation is to raise the fed funds rate, which determines interest rates for many kinds of loans throughout the economy. On Wednesday, The Fed’s policy committee voted to cut the rate by a quarter of a percentage point, out of concern that the job market is deteriorating.
Still, Powell reiterated the central bank’s determination to eventually wrestle inflation down to 2%.
“My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people,” he said to open the press conference.
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