The Federal Reserve Board of Governors said Wednesday that it was nearly ready to curtail its bond-buying program and plans to raise interest rates until 2022, reflecting strong confidence that the economy is heading for a full recovery. There is even the possibility of pulling it up.
Jerome Powell said in November that the Fed could “move easily” and curtail bond purchases if the economy continued to develop.
He also said inflation is now well above the Fed’s 2% target, but stuck to his view that it should slow significantly next year.
The Federal Reserve has been holding $ 80 billion worth of Treasury securities and $ 40 billion worth of mortgages each month since last summer to keep long-term interest rates low and stimulate demand as the economy recovers from the coronavirus pandemic. I am buying a loan-backed security.
Since the summer, the Fed has been discussing a slowdown in bond purchases. However, central banks are wary and worried that the “tapered tram” that shook global financial markets in 2013 may repeat itself.
Powell pointed out that the official announcement could be made at the Fed’s November 2-3 meeting, except for a major economic recession and another coronavirus outbreak. He spoke at a press conference after the Fed’s latest two-day strategic session.
He said Fed officials believe the tapering program is gradual and appropriate to end “mid-next year.” He spoke at a press conference after the Fed’s latest two-day strategic session.
“Today, the Fed is nearing the beginning of tapering, and it looks like it’s trying to raise policy rates more aggressively than before, raising concerns about inflation a bit,” said Michael Gregory, Deputy Chief Economist at BMO Capital Markets.
According to the updated forecast, the Fed raised interest rates three times in 2023 and three more in 2024, raising the benchmark interest rate to 1.8% by the end of the fiscal year.
But with a little twist, the Fed’s so-called dot plot suggested that the central bank could raise interest rates for the first time since the pandemic by 2022. Earlier, the Fed had suggested that the first rate hike would be until 2023.
Powell warned investors not to over-read the Fed’s dot plot charts or assume that next year’s rate hikes will be included on the card, as before.
The Federal Reserve Board has adhered to the prediction that inflation will fade back towards 2.2% by next year. The central bank expects inflation to exceed about 4.2% in 2021, according to new forecasts.
Many economists suspect that inflation will fall as quickly as the Fed expects, and even some senior central bank officials are skeptical.
As part of this, US economic growth is expected to slow from an estimated 5.9% this year to 3.8% in 2022 and 2.5% in 2023. The long-term growth potential of the economy is estimated to be about 2.5% per year.
The unemployment rate is also projected to drop to 3.5% by 2023, rivaling the lowest level in 50 years before the pandemic.
Brighter forecasts of the economy highlight why the Fed is ready to unleash unprecedented support for the US economy during a pandemic.
Earn and Benchmark 10 Year Bond Yields
Higher edging after a statement from the Federal Reserve Board.
The Federal Reserve Board says the taper “may be justified soon” and interest rates will rise in Penciller in 2022
http://www.marketwatch.com/news/story.asp?guid=%7B20C05575-04D4-B545-7656-4E24E9E7C190%7D&siteid=rss&rss=1 The Federal Reserve Board says the taper “may be justified soon” and interest rates will rise in Penciller in 2022