Fed policymakers improve Reuters’ November taper timeline


ছবি Photo from Reuters file: Federal Reserve Vice Chairman Richard Clarida speaks on the phone during a three-day “Challenges for Monetary Policy” conference in Jackson Hole, Wyoming, USA. Reuters / Jonathan Crossby


Lindsay (NYSE 🙂 by Dansmuir and Ann Safi

(Reuters) – Two U.S. Federal Reserve policymakers said Tuesday that the central bank has aligned itself with a planned move to reduce its bond-buying program, cementing expectations that the Fed will begin withdrawing its crisis-era stimulus by next month.

“I personally believe that the ‘substantial progress’ value has been met far more than our price-stability order and aligned with our employment order,” he told the Clarida International Finance Institute in a prepared statement at the Virtual Annual Meeting, as he reiterated that the Fed at its last meeting. It was agreed that the tapping would “be approved soon” and would probably end in the middle of next year.

Claridar’s exuberant assessment probably echoes the sentiments of his boss, Fed Chair Jerome Powell, who previously said he would only have to look at the “appropriate” September U.S. job report to be ready to buy bonds in November.

Earlier on Tuesday, Atlanta Fed President Rafael Bostick said last month’s job report showed considerable progress and began in November. “I would be comfortable starting in November,” he told the Financial Times in an interview. I think progress has been made, and the sooner we move in that direction the better. “

That job report, released by the Labor Department last Friday, added 194,000 jobs in September, lower than analysts had expected, but the ward upward revision in previous months meant the economy now recovered half the job deficit in December, when the Fed set a “significant advance” on jobs and inflation. “Obstacles to start tapping. Fed policymakers have already almost all agreed that the expected inflation has reached their limits.

At their last meeting, Fed policymakers saw the unemployment rate rise to 8.8% by the end of this year, which had already reached last month.

Economic improvement continues

The economy has strengthened and “labor market conditions continue to improve,” Clarida said, although she noticed that the epidemic depended on employment and participation.

Prior to the job data, Fed policymakers were divided between those who already saw this year’s gains as sufficient to reduce the asset purchase program, and those who are waiting for more evidence that jobs are on the way to recovery. The next policy meeting of the Fed will be held on November 2-3.

The Fed is buying মাসে 120 billion a month in Treasury and housing-backed securities as part of its emergency response to the Kovid-1 pandemic epidemic to help keep costs down, but has increasingly insisted that buying bonds has outlived their usefulness. The current environment.

Speaking at a virtual event hosted by the Peterson Institute for International Economics, Bostick said financial markets are now running smoothly and there is plenty of liquidity, reducing purchases will have a negative impact on the market or the economy. “I actually think the economy has a lot of positive momentum,” Bostick said.

U.S. economic output has already surpassed pre-epidemic levels, with Americans sitting at at least $ 2.5 trillion in excess savings accumulated during the epidemic, and consumer spending remaining strong. Bond buying directly affects demand most where the global economy is struggling with labor and commodity shortages.

Indeed, the resumption of the US economy has led to a surge in demand-side inflation and has hampered supply at the end of the year and beyond the Fed’s 2% average inflation target by 2022.

“The biggest unknown at the moment is how long these obstacles will take them to work,” Clarida said in the Q&A session. “My baseline case is not for stagnation on the medium horizon.”

If inflation does not begin to decline next year, as most Fed policymakers, including Clarida, still expect, the central bank may be forced to raise interest rates from near before the labor market fully recovers. “The risk side of inflation is upward,” Clarida acknowledged, although she rejected any notion that the Fed would face a choice between its two orders and said inflation expectations would remain dirty.

But Bostick said while high inflation needs to be monitored, he doesn’t think it’s still at a stage where it will affect the Fed’s position on interest rates.

“I don’t see signs that this high inflation is hurting the economy in a way that will really question our policy position on interest rates,” Bostick said, adding that he still hopes it will be even higher than the central bank raised rates from zero a year ago. .

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