The Fed will likely open the door to bond-buying, but will hedge in Reuters’ view.


ছবি Photo from Reuters file: Federal Reserve Chairman Jerome Powell testified during a hearing at the U.S. House Oversight and Reform Select Subcommittee on Capitol Hill in Washington, DC, June 22, 2021.


By Howard Snyder

WASHINGTON (Reuters) – The Federal Reserve will clear the way for a reduction in its monthly asset purchases later this year on Wednesday and show in updated estimates whether the expected inflation or resurgent coronavirus epidemic is weighing more on the economic outlook.

Fed policymakers, who are concluding their last two-day meeting, have handed over a conflicting set of developments since late July লক্ষ signs of a downturn in the services sector, a Covid-1 sur increase that took place last summer and weak jobs in August, all still strong As well as inflation – there was conflict among themselves over how to respond.

Officials have said in most cases that the economic recovery will continue and will allow the US Federal Reserve to move ahead with its করার 120 billion cuts from the Treasury and mortgage-backed securities by the end of 2021 and shut them down altogether. The first half of next year.

But forecasters and outside analysts expect exactly when the Fed could start “tapping” and return to job growth after a disappointingly embarrassing report in August, when only 235,000 jobs were created.

The Fed is due to release its latest policy statement and economic projections at 2pm EDT (1800 GMT), with Fed Chair Jerome Powell holding a press conference half an hour later to discuss the results.

The statement will likely acknowledge that the economy has taken another step toward “significant further progress,” with the Fed saying it wants to see it in the labor market before reducing its bond purchases, an analysis says. While job growth in August was disappointing, non-farm wages in the United States rose by just over 1 million in July and averaged 716,000 since May.

Nevertheless, high-frequency data and alternative employment indicators indicate that upcoming job gains may also be disappointing, and Jefferies analysts said the first real decline in asset purchases would probably be “conditional on tough September job gains.”

The U.S. job market is about 5.3 million places lower than it was before the epidemic.

Responding to a Reuters poll, 60% of economists said they expected bond purchases to decline in December.

However, Fed officials may decide that they need more time to assess risk from a few evolving issues before deciding to move forward with the reduction of the bond-buying program. Financial markets have been booming over the past week due to concerns over the impact of the spillover over the possible collapse of China Evergrand Group, a major Chinese property developer, and the week has started with the biggest daily loss in four months.

Meanwhile, U.S. lawmakers are not coming close to resolving the biased dispute in Congress over lifting the federal debt limit, raising the possibility of a partial shutdown of the federal government.

Inflation Watch

When it comes to bond-buying pressures, it will begin to move away from the measures introduced in March 2020 to help the economy through the epidemic and move towards more general monetary policy that will eventually include higher interest rates.

Ahead of the Fed’s Nov. 2 policy, Powell may find out whether President Joe Biden wants to nominate him for a second term as head of the central bank. The final start is not related to the debate over interest rates. This is something he can repeat on Wednesday.

Policymakers anticipate new economic and interest rates, however, to see how fast growth rates could follow the pressures, and whether officials are pencil to initial growth for next year due to high inflation in particular.

As of July, the Fed’s preferred measure of inflation was about 4.2% on an annual basis. This is double the central bank’s 2% target, and some officials think enough is enough to meet the central bank’s new commitment to allow inflation to moderate above the target to ensure it has reached average levels, a precursor to rate hikes.

Leaning the other way: A wave of COVID-19 infection driven by the delta variant of the coronavirus.

Since June, when the Fed noticed the positive effects of the Covid-1 vaccine and said the economy’s performance was recovering from the epidemic, the central bank’s July 7 July transition average increased fivefold to 5,000,000 -28 meetings. It has almost doubled since then.

Some measures of service activity have declined, prompting forecasters to identify their outlook for economic growth this year.

The Fed could follow suit.

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