Washington: federal Reserve Wednesday cleared the way for reducing their monthly bond purchases “soon” and indicated interest rate hikes could happen faster than expected, with nine out of 18 US central bank policymakers raising borrowing costs in 2022. will need to grow.
The actions, covered in the Fed’s latest policy statement and separate economic projections, represent a blatant tilt by the central bank that has kept inflation this year running at 4.2%, more than double its target rate, and its in a position to take action against .
This action may proceed gradually, seeing interest rates rise by 1% in 2023, faster than the Fed’s projections in June, and then to 1.8% in 2024, which is still considered a lax monetary policy. attitude will be considered.
During that time inflation would be allowed to run slightly above the Fed’s 2% target, in line with its new, more tolerant approach to the pace of price hikes, while keeping unemployment down to a pre-pandemic low of 3.5%. But is seen falling back.
Still, the change reflects agitation among policymakers on whether the impact of the coronavirus pandemic on the economy or the risk of breakout inflation is a bigger risk.
The Fed on Wednesday kept its current target interest rate stable in the range of 0% to 0.25%.
US stocks extended gains after the statement was released, with the S&P 500 index up 1.3%. The dollar reversed and went down, while the yield on the US 10-year Treasury note was slightly lower.
The central bank’s policy-making Federal Open Market Committee said in a unanimous statement that although the new surge of the pandemic had slowed the recovery of some parts of the economy, the overall indicator “continues to strengthen”.
If this progress “continues as widely expected, the Committee decides that a moderation in the pace of asset purchases may soon be warranted,” it said.
The statement was widely expected to signal that the Fed would soon begin closing $120 billion in monthly bond purchases, making up for blunting the economic impact of the pandemic.
But it was in his macroeconomic outlook that Fed policymakers made a less anticipated change.
The inflation outlook for 2021 increased to 0.8 per cent and the unemployment rate seen at the end of the year.
In turn, the two officials pushed forward their projected timeline for 2022 to slightly raise the Fed’s benchmark overnight interest rate from current levels, enough to raise the average projection for the next year to 0.3%.
The actions, covered in the Fed’s latest policy statement and separate economic projections, represent a blatant tilt by the central bank that has kept inflation this year running at 4.2%, more than double its target rate, and its in a position to take action against .
This action may proceed gradually, seeing interest rates rise by 1% in 2023, faster than the Fed’s projections in June, and then to 1.8% in 2024, which is still considered a lax monetary policy. attitude will be considered.
During that time inflation would be allowed to run slightly above the Fed’s 2% target, in line with its new, more tolerant approach to the pace of price hikes, while keeping unemployment down to a pre-pandemic low of 3.5%. But is seen falling back.
Still, the change reflects agitation among policymakers on whether the impact of the coronavirus pandemic on the economy or the risk of breakout inflation is a bigger risk.
The Fed on Wednesday kept its current target interest rate stable in the range of 0% to 0.25%.
US stocks extended gains after the statement was released, with the S&P 500 index up 1.3%. The dollar reversed and went down, while the yield on the US 10-year Treasury note was slightly lower.
The central bank’s policy-making Federal Open Market Committee said in a unanimous statement that although the new surge of the pandemic had slowed the recovery of some parts of the economy, the overall indicator “continues to strengthen”.
If this progress “continues as widely expected, the Committee decides that a moderation in the pace of asset purchases may soon be warranted,” it said.
The statement was widely expected to signal that the Fed would soon begin closing $120 billion in monthly bond purchases, making up for blunting the economic impact of the pandemic.
But it was in his macroeconomic outlook that Fed policymakers made a less anticipated change.
The inflation outlook for 2021 increased to 0.8 per cent and the unemployment rate seen at the end of the year.
In turn, the two officials pushed forward their projected timeline for 2022 to slightly raise the Fed’s benchmark overnight interest rate from current levels, enough to raise the average projection for the next year to 0.3%.
.