The Fed prepares the ground for the reduction of purchases
Changes in US monetary policy are postponed for future meetings. A month after the Federal Reserve advanced the rate hike to 2023, the members of the institution met again to assess economic conditions and discuss a possible reduction in the purchase program. After two days confronting ideas, the Fed Open Market Committee (FOMC) decided to keep rates unchanged, which have remained in the range of 0-0.25% since March 2020, and agreed to continue buying debt at a rate of 120,000 million dollars per month, a rate that remains unchanged since December.
True to the words of Jerome Powell to give advance notice before agreeing to new changes, the US central bank is slowly beginning to pave the way for tapering. In the Committee's statement, the members of the institution highlight that the world's leading economy is heading towards the employment and inflation objectives, suggesting that progress is being made to proceed with tapering, a process that the market expects to reach at the end of the year. of year. However, although tapering is getting closer, the Fed is committed to adjusting its monetary policy orientation if risks arise that could prevent the achievement of the objectives.
“With advances in vaccines and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most affected by the pandemic have improved, but have not fully recovered, ”says the institution in the statement. After the surprises given by inflation in recent months, the Fed once again stressed that the rises in are largely due to transitory factors, an idea that Powell also highlighted at the press conference when he pointed out that by transitory he refers to leave no permanent mark on inflation and that the process of rising prices is expected to stop. In case anyone had any doubts, the committee reiterated that it intends to reach maximum employment and inflation at a rate of 2% in the long term.
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“Given that inflation has been persistently below this, we will try to achieve moderately above 2% inflation for some time,” he remarks. In other words, it drives away the ghosts of a rise in the price of money, something that is planned for 2023. In the subsequent press conference, Jerome Powell announced that they expect inflation to exceed 2% in the coming months and assured that in the next meetings will provide more clarity. Powell expects job creation to pick up traction in the coming months as he believes they are still far from substantial progress in the labor market. Regarding the rise in rates, the central banker considers that there is still a long way to go and they are located on a very distant horizon.
The lack of specificity prevented Wall Street from leaving doubts. In the middle of the session, the Dow Jones and the S&P 500 were trading in tables while the Nasdaq scored 0.5% thanks to the good results achieved by the big technology companies. In the debt market, the 10-year US bond rose slightly to 1.26%.
