3 hours ago
Washington – AFP: The US Federal Reserve (Fed) concluded its two-day monetary committee meeting on Wednesday, with markets awaiting any indications about its intentions in the near future, but the announcement of a timetable for reducing stock buying will certainly be later.
The purchase of shares and bonds is the backbone of the monetary easing policy pursued by the Bank in the face of the economic repercussions of the Covid-19 epidemic. The markets are awaiting the press conference of its president, Jerome Powell, which started at half past six in the evening yesterday, to pick up any sign of reducing stock purchases.
But most analysts are not expecting a firm announcement this time and are betting on the November meeting to find out the timetable.
In fact, the Fed wants to gradually reduce the $120 billion a month in Treasury and other stock purchases it has made since the crisis began. But in order to do so, he wants to ensure that the economic recovery is sufficiently robust.
But the situation is not improving as quickly as expected, between growth curbed by the spread of the delta mutant, and disappointing job creation in August.
To assess the situation, over the past two days, US Federal Reserve officials have studied the progress made in employment and inflation.
On the first front, a slowdown in the labor market was observed in August after good progress in June and then in July, and only 235,000 jobs were created, three times less than expected, although unemployment rates continued to decline to 5.2%.
And on inflation, it certainly showed signs of moderation but it hit 4.2% in a year in August, and remains well above the 2% Fed target over the long term.
Several officials from the monetary institution warned in the past weeks that the price hike may remain in effect for a longer period than expected.
Markets are also watching the economic outlook for growth, jobs and inflation to be adjusted.
Ian Shepherdson, an economist at Pantheon Economics, predicted that “the growth forecasts will be lowered this year, but inflation will be higher.” Jerome Powell is expected to stress again the fact that lower stock purchases will not be accompanied by higher key interest rates.
These prices were reduced to rates between 0% and 0.25% in March 2020, in the face of the imminent threat posed by the COVID-19 epidemic to the United States, and are expected to remain at this level for a period of time.
A chart will be updated showing when each member of the Monetary Committee – whether they are voters or not – thinks it would be wise to change it. During the last update in June, most Fed officials predicted the first rally in 2023.
It is noteworthy that the most prominent economies of the world are talking about the possibility of tightening monetary policy without a clear plan or specific dates. The European Central Bank timidly launched the move, but postponed the debate to December, as the Bank of England fears tightening monetary policy will stifle the budding economic recovery.
“We would be surprised by the official announcement of a slowdown given the unresolved Federal Debt Ceiling, and the ongoing disruption to the economy caused by the proliferation of mutant delta,” said Ian Shepherdson.
A new shadow hangs over the US economy, and thus the global economy, which is the US default.
The US debt ceiling has been in effect again since August 1, two years after the suspension, and if there is no agreement in Congress to suspend it again or to raise the maximum allowed debt, the United States will not be able to borrow to finance itself, and may have to stop paying some of its obligations.
The country has only enough cash to make payments until mid-October. A default by the world’s largest economy would have serious repercussions.