The Fed expects interest rate hikes to be delayed until at least next year

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One of these risks could be an inflation spike.

Fed officials expect inflation to hit 2.4% this year, above their December estimate of 1.8% and slightly above the central bank’s target of about 2%.

The Fed also cited public health indicators, labor market conditions and financial market developments as potential risks in its statement.

The central bank left interest rates unchanged between zero and 0.25%.

Shares shot up shortly after the statement.

Investors are concerned that the full reopening of the economy will lead to a spike in consumer price inflation, which in turn will force the Fed’s hand to hike interest rates sooner than hoped. Government bond yields have risen against the backdrop of this dissertation, rising to a 13-month high of 1.67% on Wednesday.

According to the Fed’s consensus forecast – known as dot plot – the central bank does not expect rate hikes in 2021, but four Fed officials forecast higher interest rates in 2022.

But while inflation may be the bogeyman that is haunting Wall Street these days, higher consumer prices would come on the heels of an improving economy. Fed officials forecast that US gross domestic product, the broadest assessment of economic activity, would grow 6.5% this year, more than the 4.2% forecast in December. Meanwhile, the unemployment rate is expected to fall to 4.5% by the end of the year, compared to the previous forecast of 5%. As of February, the country’s unemployment rate was 6.2%

This is a story in progress. It will be updated

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