Fed members discussed the possibility of economic measures and actions at the Federal Open Market Committee (FOMC) meeting on Wednesday. The Fed said that the central bank has not yet considered cutting down on large-scale asset purchases, and the central bank also plans to maintain interest rates close to zero. Fed Chairman Jerome Powell said of the decline in the purchasing power of the U.S. dollar, “Inflation may be higher and more durable than we originally expected.”
The Fed will continue its monetary easing policy and keep interest rates low
As the days go by, Americans are increasingly worried about inflation, and the latest results of the FOMC meeting on Wednesday are not very reassuring to economists and financial analysts.
Before Wednesday’s meeting, market observers believed that the central bank might begin to announce a gradual withdrawal from quantitative easing by curbing the purchase of billions of dollars in bonds and mortgage-backed securities (MBS) that occur every month. In addition, it is expected that the Fed will raise interest rates again because the central bank has been holding interest rates close to zero.
-Giorgi Kvesitadze (@ GiorgiKvesitad1) July 28, 2021
The results of Wednesday’s meeting showed that Jerome Powell, John Williams, Thomas Barking, Rafael Bostic, Michelle Bowman, Lyle Brainard, Richard Krall Fed members such as Rida, Mary Daley, Charles Evans, Randall Quarles, and Christopher Waller are not yet ready to act.
The Fed will not raise interest rates, but pointed out that the economic recovery is getting closer. The U.S. Central Bank also said it would not curtail large-scale asset purchases, because Chairman Jerome Powell said the Fed was not fully prepared yet.In addition, when banks start to scale down, the Fed plans to reduce bond purchases first, and then start easing policies. MBS purchase.
“Almost no one supports [the] Tapering idea [mortgage-backed securities] Earlier than U.S. Treasury bonds,” Powell said on Wednesday. The Federal Open Market Committee’s statement stated that since December last year, the economy “has made progress towards these goals, and the committee will continue to assess progress in subsequent meetings.” Federal Open The market committee’s post-meeting statement stated:
The industries most adversely affected by the pandemic have improved, but have not yet fully recovered. The rise in inflation mainly reflects temporary factors. The overall financial situation remains accommodative, partly reflecting policy measures to support the economy and the flow of credit to American households and businesses.
Criticism of the Fed’s lack of decision-making has intensified, and the Fed will not stop easing monetary policy until it achieves “substantial further progress”
Of course, a large number of U.S. journalists put pressure on Fed members to answer the question of rising inflation. The economist and gold bug Peter Schiff said that Fed Chairman Jerome Powell “evaded” these issues.
“Even if the labor market has not yet fully recovered, Powell easily avoided answering the question of whether he is willing to raise interest rates to combat inflation,” Schiff Tweet After the meeting. “That’s because stagflation has arrived, and the Fed cannot admit to this dilemma without making the situation worse,” he added.Schiff continues to scrutinize Powell’s statement severely Say:
Powell said that until the economy reaches full employment, the Fed will not even consider whether higher inflation is not temporary, no matter what it means. Since we have entered stagflation, full employment will never exist. Inflation will continue to rise until the collapse of the dollar makes the situation worse.
Macroeconomists and analysts from Northman Trade Network, Sven Henrich also criticized the Fed’s lack of action.When Henrich was asked why the Fed did not plan to scale back MBS purchases, he said Say“Because they are afraid of market reaction. In the real estate market where house prices have risen by more than 20% year-on-year at record prices, there is zero economic reason to inject $40B into MBS every month. There is nothing.”
Henrich further stated that he doubted the Fed would regret not downsizing.However, economists Add to:
Of course they will not admit it, because the Fed does not admit its mistakes.
At the moment, market observers will have to wait, as Schiff pointed out that Wednesday’s meeting was set to “Talking a lot, no action. “Since March 2020, loose monetary policy has remained stable. Since then, the U.S. Central Bank has purchased $40 billion in MBS and $80 billion in U.S. Treasury bonds. Powell and other FOMC members wholeheartedly believe that despite the Criticism by the media and market observers, but the monetary easing policy will continue until “substantial further progress” is made.
What do you think of the Fed’s decision to do nothing and continue large-scale quantitative easing and keep interest rates close to zero? Do you think the Fed will regret these decisions or do you think the central bank’s actions are necessary? Let us know in the comments section below.
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