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Topfed’s official signal economy is strong enough to start the taper

Federal Reserve Renewal

High-ranking Federal Reserve Board officials have shown that the US economy is strong enough for central banks to begin cutting their large bond-buying programs, but has encouraged a “patient” approach to raising interest rates.

New York Fed President John Williams acknowledged the improved economic outlook and prepared the Fed to curtail its $ 120 billion monthly asset purchase program this year.

But he emphasized that the Fed is far from finally meeting the conditions needed to adjust key policy rates.

“The headline of our economic story is good news. The recovery continues to show solid momentum, but the subheading is that we need to be patient,” he hosted the Economic Club of New York on Monday. I said at the event I did. “Despite the strong pace of growth that we have experienced much of the year, a full recovery from a pandemic will take some time to complete.”

Williams, who expects economic growth to reach 5.5-6% this year, said the move to curtail the central bank’s asset purchase program could be “justified” soon, and said last week’s Federal Reserve Board of Governors. It reflects a message from the Fed Chair Jay Powell.

Powell last week Tea up The announcement on the tapering process at the next policy meeting in November showed widespread support among central bank officials for the complete completion of the stimulus program by mid-2022.

The Federal Reserve Board has said it will continue to buy government bonds and government mortgage-backed securities at a monthly pace until it sees an average of 2% inflation and “substantial further progress” towards maximum employment. I did.

The tapered timeline shows that the number of Fed officials will increase in 2022 as individual forecasts for interest rates are revised. This split the 18 Federal Open Market Committee evenly in next year’s move. Three increases are expected by the end of 2023.

Chicago Fed President Charles Evans told reporters that he would support a 2023 rate hike and a “moderate rise” in interest rates from it.

Powell reiterated last week that the Fed’s threshold for raising interest rates from its current near-zero level is much tighter than the threshold for dialing down asset purchase programs.

Williams said Monday that the labor market still has a “long way to go” before reaching the Fed’s maximum employment target. The unemployment rate has dropped to 5.2%, but there are more than 5.3 million fewer jobs than before the pandemic.

Williams also said the surge in inflationary pressure that pushed US consumer price inflation to its highest level in 13 years is likely to weaken over time as supply chain bottlenecks ease. ..

He said inflation is expected to return to about 2 percent next year as the pandemic-related turmoil eases. The Fed’s recommended index, the Core Consumer Expenditure Index, is 3.6%.

“It’s important to remember that monetary policy stances continue to support a strong and complete economic recovery and sustained inflation of an average of 2%, even after asset purchases are complete,” he said. Told.

Topfed’s official signal economy is strong enough to start the taper

Source link Topfed’s official signal economy is strong enough to start the taper

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