Fed Meeting Likely to Signal Possible Policy Shifts

Rising costs for everyday foods such as bacon and fruit have raised concerns about inflation. Here’s why you may be paying more for breakfast, and what that says about where prices might be heading in the future. Photo: Carter McCall/WSJ

WASHINGTON—Federal Reserve officials are set to provide updated details on their plans for eventually scaling back easy-money policies as they conclude a two-day policy meeting amid signs of accelerating economic growth and inflation.

The Fed on Wednesday is likely to say after the meeting that it will maintain short-term interest rates near zero and keep buying at least $120 billion a month of Treasury and mortgage bonds. The central bank will also release individual policy makers’ updated quarterly economic projections.

The new forecasts could show officials expecting to raise interest rates sooner than they anticipated in March, when most saw the benchmark federal-funds rate remaining steady through 2023. They are also likely to begin discussing when and how to start scaling back bond purchases.

Fed officials want the economy to get closer to their goals of “maximum employment” and sustained, 2% inflation before reducing the bond purchases. They have said they want to fully achieve those objectives before they raise interest rates.

Since officials’ April meeting, the labor market’s progress has been somewhat slower than they had anticipated. Employers added 837,000 jobs in April and May, leaving total employment 7.6 million jobs shy of pre-pandemic levels.