Federal Reserve hold interest rates steady, but raises expectations for rising inflation

The Federal Reserve on Wednesday decided to keep interest rates steady but raised its expectations for rising inflation this year as the country moves out of the pandemic.

The Federal Open Market Committee, a part of the Federal Reserve, which oversees the nation's markets and makes key decisions about interest rates, adjourned for a policy meeting on June 15 and 16, and is expected to make two interest rate increases by the end of 2023.

Federal Reserve officials issued a statement saying that recent rising inflation has been due to "transitory factors" that arose due to the reopening of the economy as the COVID-19 pandemic lessens.

One of such factor is problems with so-called supply chains.

Factories shuttered because of the pandemic has resulted in a scarcity of parts or entire products, like dishwashers, to the marketplace, which in the short term has significantly increased prices. 

The reserve says it aims to "achieve inflation moderately above 2 percent for some time."

"Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened," the statement read. "Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses."

The agency announced it would keep its interest rate at 0 to 0.25% and said it would also buy $120 billion in government-backed bonds each month, which it says would keep longer-term borrowing costs low and speed up growth and job market healing, according to The New York Times.

The meeting and the decision to hold interest rates steady come after the Labor Department reported on June 10 the fastest increase of the consumer price index since 2008, jumping 5% in May 2021, sparking inflation fears.