When Federal Reserve officials raise interest rates on Wednesday, they will do so amid an unfortunate economic reality: Many of the inflationary pressures they had long assumed would dissipate have instead lingered, and some are getting worse, the New York Times reported. Central bankers have consistently underestimated how high inflation would rise, and how long it would last, as the economy has surged back from pandemic shutdowns. They will release a fresh set of quarterly economic projections Wednesday, in which they are likely to raise their inflation forecasts for the fifth time in a row. Like many private sector forecasters, the Fed misjudged how strong American demand would be for goods and how long that demand would help to keep global supply chains running behind schedule, forces that have combined to push up consumer prices. Officials spent much of the past year expecting a relatively quick return to some pandemic-infused version of normality, but backlogged factories, crowded ports and overburdened trucking companies are still failing to catch up. Repeated waves of the virus have exacerbated the problems, which along with rising wages and services prices have sent inflation higher. Consumer price gains hit a new 40-year high in February, pushed up by rising prices for food, rent and gas. Now, as Fed officials prepare to begin a series of interest rate increases to try to bring inflation under control, they again appear to be aiming at a moving target. Supply chains that showed signs of improvement in January and February are being thrown further into disarray by the Russian invasion of Ukraine and sweeping lockdowns in China, developments that promise to lengthen delivery times and add to prices.
