The Federal Reserve set off some fireworks Friday at its September meeting in Washington.
Federal Reserve Chairwoman Janet Yellen is on a mission to bring the central bank’s policymaking committee closer to a “neutral” level, despite more evidence of rising inflation.
But the Fed is no closer to actually accomplishing the goal, with core inflation at just 1.6 percent.
At the central bank’s September meeting, she painted a grim picture of inflation in the United States, told her colleagues that recent federal tax cuts will “increase near-term growth,” and added that she was “prepared to employ all of our tools — including rate increases — to maintain a strong labor market and price stability.”
The Fed finally raised its benchmark interest rate in December last year, but has been unusually quiet for the past six months. On Friday, Ms. Yellen reassured members of the Federal Open Market Committee that it was cautious.
“We remain on track to begin normalizing the stance of monetary policy this year, but we will proceed with caution, mindful of the progress made since the financial crisis and the still-significant risks to the economic outlook,” she said in a statement.
Inflation has grown stubbornly weak. It surged 4.1 percent in February, and economists at Nomura downgraded their forecast for core inflation for this year from 1.6 percent to 1.5 percent.
Ms. Yellen was a bit more optimistic. The two largest economic events of the year are the federal tax cuts and an approaching end to the regulation of banks.
In her outlook, Ms. Yellen projects that the U.S. economic growth will accelerate to nearly 3 percent this year, from roughly 2.6 percent last year.
She projected that unemployment will fall to 4.5 percent in December, from 4.9 percent in August. The unemployment rate was 4.1 percent in August.
The Fed, of course, is widely expected to raise rates again at its December meeting. Economists polled by The Wall Street Journal said they expect a quarter-point hike, to 2.25 percent.