Chair Powell says the Fed isn’t more tolerant of higher inflation. Some economists disagree

US inflation is down considerably from the 40-year highs reached in the summer of 2022. But it remains above the official 2% target set by the Federal Reserve.

US inflation is down considerably from the 40-year highs reached in the summer of 2022. But it remains above the official 2% target set by the Federal Reserve. At their latest policy meeting earlier this month, officials revised up their economic projections for growth and inflation, while affirming their expectations of cutting interest rates this year. Some economists interpreted that as a sign that the Fed is now more tolerant of higher inflation. Central bankers repeatedly emphasize how important it is to get inflation under control, often mentioning the toll it takes on all Americans, especially those living paycheck to paycheck. After jacking up interest rates to a 23-year high, the Fed has made a lot of progress, but the final stretch is proving difficult, or “bumpy,” as Fed Chair Jerome Powell likes to describe it. Consumers prices were up 2.5% in February from a year earlier, according to the Fed’s favorite inflation gauge, which was released Friday. That’s a notch higher than January’s 2.4% annual rise and reflects Powell’s aforementioned bump. Powell pushed back on the perception that the central bank has grown more comfortable with inflation being higher for longer than expected in his post-meeting news conference. “No, it doesn’t mean that,” Powell said. “We did mark up our growth forecast, and so have many other forecasters, so the economy is performing well, and the inflation data came in a little bit higher as a separate matter and I think that caused people to write up their inflation [projections].”