Photo: Win McNamee / Getty Images
By: EFE
Thursday, November 14
The Federal Reserve would begin the withdrawal of monetary stimulus in November
WASHINGTON – The beginning of the withdrawal of the monetary stimulus in the United States could begin at the next meeting of the Federal Reserve (Fed), scheduled for November 2 and 3, through a reduction in the volume of monthly bond purchases.
This was indicated by the country’s central bank this Wednesday at the end of its two-day monetary policy meeting, in which it kept benchmark interest rates unchanged between 0% and the 0. 25%.
conditions ”for the start of the decline in the multi-million dollar monthly bond purchase program of $ 120, 000 million dollars in “the next meeting”, said the president of the Fed, Heh Rome Powell , at a press conference.
Emphasized, no However, that the reduction would occur “gradually”.
“We estimate that, if this continues, the asset purchase would end in the middle of next year,” Powell reported.
In this way, Powell was more precise than the central bank’s monetary policy statement stating that “if (economic) progress continues generally as expected, the committee judges that a moderation in the pace of bond purchases could soon be justified. ”
No changes in interest rates
The The Fed lowered interest rates in the near-zero range and launched the multi-million dollar bond purchase program in de 2020 to help the economy after the arrival of the coronavirus to the country , measures that it has maintained since then.
Powell warned that interest rates are not “directly” linked to the reduction in the purchase of bo us, and remarked that given that the recovery “is still underway” it is not expected to modify them in the short term .
The forecasts – indicative but not binding – of the members of the Committee Federal Open Market Fed (FOMC), which directs monetary policy, note that the earliest will be at the end of 2022 for the first interest rate hike in the US .
However, Powell warned that, despite the improvement, “Nobody knows how the economy will be in a year.”
Lower growth forecasts and higher inflation
The Fed lowered its economic growth forecasts up to 5.9% this year, compared to the 7% estimated three months ago and slightly raised inflation rates from 3.4% to 4.2% par at the end of the year.
Inflation is now one of the main reasons for concern in the US, since it is above 5%, at levels not seen in more than a decade.
The big question is whether this price rally is temporary and as a consequence of the lifting of the restrictions imposed by the pandemic and the economic reopening, or if it is due to reasons of fund, which would be more dangerous.
The central bank considers it to be of a transitory nature, estimating that in 2022 inflation will moderate to 2.2%, close to the annual goal of 2%.
“Inflation is high and will probably stay that way for a few months before moderating,” Powell said.
The Fed has a dual mandate of price stability and promotion of full employment.
The labor market in the United States continues to show progress, although at a slower pace than the expected, and the unemployment rate closed August at 5.2%, compared to 6.7% at the end of 2020.
The US central bank has two monetary policy meetings left before the end of the year, the aforementioned from the beginning of November, and the last, in the middle of December.