Federal Reserve Chairman Jerome Powell will attend a hearing of the House Financial Services Commission on September 30, 2021 at Capitol Hill, Washington, USA.
Aldrago | Reuters
Expect more rigorous discussions as the Federal Reserve may consider ending the fixed income program sooner than expected.
Based on comments from many Fed officials, market experts are now discussing whether central banks should act more quickly to end the quantitative easing program at a meeting on December 14-15. I’m expecting that.
Grant Thornton’s Chief Economist, Dyan Swonk, said: “The economy is strong and hot. It’s not a bad thing. It’s a boom. You can’t escape it. The Fed has to adjust.”
Even if you didn’t decide to cut back on bond purchases in December, the Fed’s tone should sound much more hawkish than it was before after the pandemic.
The Federal Reserve Board announced after them Meeting in early November They begin delaying bond purchases at a pace of $ 15 billion a month and virtually end the program in mid-2022. When the program is complete, the Fed will reduce the federal funds rate to zero.
Minutes of the meeting, released Wednesday, show that some federal officials want a faster pace of asset tapering, with various members Central banks may need to raise interest rates faster If inflation continues to rise. After the 2 pm release, the stock was sold out.
“If they want to keep the distance between tapering and lift-off, they need to get it out of the way. That’s justified. We have a strong economy,” Swonk said. ..
Federal Reserve Bank of San Francisco Governor Mary Daly was considered a pigeon and was the latest official On Wednesday, the central bank said it could accelerate the end of its $ 120 billion monthly bond purchase program.
Expectations for the Fed’s rate hike rose dramatically last week, and daily comments further raised them.
According to Peter Boockvar, Chief Investment Officer of the Bleakley Advisory Group, the futures market has a 66% chance of a quarter-point rate hike in May and a 60% chance of a third rate hike by December next year. Reflects. Two-year bonds, which are closely related to other interest rates, especially the federal funds rate, are also rising.
It was 0.64% for the two years on Wednesday.
Federal Reserve Board Christopher Waller and Federal Reserve Vice-Chair Richard Clarida mentioned accelerating the taper process last week. Waller said last Friday The Federal Reserve should finish the purchase by April instead of June.
“Whether the Fed has made a decision on tapering speedups or has discussed tapering speedups, it’s real at the December meeting,” Bookbar said. By December, he said the Fed also had more data, showing hotter consumer inflation and a stronger job market.
NS Latest report Inflation in core consumer spending rose 4.1% year-on-year in October, the highest since 1991. Economists expect the November employment report to show that more than 500,000 salaries have been added when it’s released for a week starting Friday.Weekly unemployed billing It was 199,000, the lowest since 1969.
However, Vincent Reinhart, chief economist at Drafus and Melon, does not expect the Fed to decide to taper faster.
“We are at a stage where market participants are ahead of us. All Fed officials say they want to have the options available. They want to sound more hawkish in that context.” Said Reinhardt. “What if market participants think you’re ignorant of inflation and you’re behind the curve … the paradox they have is to tell a tough story. They’re so tough. It may not be necessary. “
He said the Fed sounds ready to fight inflation, but keeping the market from hawkish enough to move is a balancing act.
“The fact that they are taking $ 15 billion a month is already fast by precedent,” he said. “But unless they want to send a very strong signal, I don’t think they will …. Because changing an asset purchase is a blunt instrument, to send such a very strong signal. They probably don’t want it. They rely on it. If they’re just talking about moving dates forward a few months, they can’t get much from it. “
President Joe Biden elected Federal Reserve Chairman Jerome Powell for the second term this week. His confirmation hearing will take place before Congress next month, which should be an opportunity to emphasize that he sounds more hawkish and the Fed does what it needs to do to curb inflation. ..
Bookbar said he expects the central bank to focus on the fixed income program before it needs to adjust its view of interest rates. In the past, the market has become volatile due to the end of the quantitative easing program. “I think the Fed will focus on ending the taper without causing an accident. There is no point in guessing when they will raise interest rates,” he said.
The Federal Reserve could become a central bank for tighter discussions
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