Inflation and “delta” on the agenda of the Federal Reserve
Monday – 16 Dhu al-Hijjah 1442 AH – 26 July 2021 AD Issue No. [
Inflation is the most prominent issue on the Federal Reserve’s table, with the expectation of “Delta” around the world (AP)
Washington: Asharq Al-Awsat.
“The delta shifter adds a new dose of uncertainty even if the economy is recovering,” says Diane Swank, an economist at Grant Thornton, according to Agence France-Presse.
This viral version, which has contributed to a sharp rise in COVID-19 cases in many regions of the world, may jeopardize the successful economic recovery in the United States.
Another concern is prices, which are now rising at the fastest pace in 13 years. This high inflation (+3.9 percent in one year in May, according to the personal consumption expenditures index monitored by the Federal Reserve, and +5.4 percent in June, according to the consumer price index) remains of great concern, especially It should last for at least several more months.
Federal Reserve Chairman Jerome Powell asserts, however, that this phenomenon is supposed to be temporary and then slow down. Like many economists, he expects inflation to stabilize in the medium term around 2 percent; This is the goal of the Federal Reserve.
Therefore, central bank officials should continue to “discuss an important policy change that is being complicated by an atypical economic cycle … witnessing a global increase in cases (Covid 19) due to the mutated (delta)”; According to Kathy Postiancic; Economist at Oxford Economics.
“The main economic indicators show an uneven economic expansion, while disruptions in the supply network are curbing activity on the supply side,” she adds.
So it is likely too early for the monetary institution to provide details on the date or pace at which it plans to reduce its support for the US economy.
Since the beginning of the epidemic, the “Federal Reserve” rates have ranged between 0 and 0.25 percent, and the monetary institution purchases $120 billion per month in Treasury bonds and mortgage-backed securities.
These plans to reduce monetary support may be announced at the end of August during the “global meeting of central bank governors” in “Jackson Hole (Wyoming)” or at the end of September during the next meeting of the Federal Reserve’s monetary committee, according to analysts.
And Diane Swank expects Powell to “reiterate his desire to see additional improvements,” noting that “there is no road map yet.”
Federal Reserve officials want to be able to note the progress made to begin tightening their monetary policy.
On the employment front, however, Jerome Powell recently stated that “there is a long way to go” before returning to full employment. The unemployment rate was still 5.9 percent during June, compared to 3.5 percent before the crisis and the lowest level in 50 years.
In addition, second-quarter GDP growth will be revealed Thursday, the day after the Federal Reserve meeting. Expected to be +8.5% vs. +6.4% in the first quarter, annualized – qoq with full-year development expected, the US benchmark.
In a first stage, asset purchases from the Federal Reserve should be reduced starting in early 2022 and at the level of $15 billion per month for 15 months, according to Kathy Postiancic.
She said that prices may start to rise in 2023, as expected by Federal Reserve officials at their last meeting in mid-June. Then they raised their growth expectations.