The Us Federal Reserve Has Warned That The Recovery Will Slow And Interest Rates Will Remain Unchanged

2021-01-27   |   by CusiGO

The Federal Reserve’s first meeting of the year, which ended in Washington on Wednesday, is also the first under Joe Biden’s presidency. So, in view of the Democrats’ ambitious stimulus plan and their efforts to speed up coronavirus vaccination, the conclusions of the meeting also diagnosed the feasibility of the program and the support needed for its implementation. No one doubts that maintaining the price of money at around 0% will last for a year, but Biden’s plan is expected to have a predictable impact on an economy with limited forecasts. First of all, his arrival in the White House has given the fed a sigh of relief that it was forced to actively defend its independence during Donald Trump’s administration.

“The recovery of the U.S. economy depends on covid-19 and vaccination,” the agency said in a statement. “The recovery in economic activity and employment has slowed in recent months, with weakness concentrated in the sectors most affected by the epidemic.” As expected, the Fed kept interest rates in the target range of 0% to 0.25%. The first reaction was unexpected: the dollar index fell from 90.50 to 90.44.

At its recent meeting, the Federal Reserve made a major reform of its traditional policy, linking any future rise in interest rates with a sustained rise in inflation, And any change in their $120 billion a month bond buying business, which has injected liquidity into financial markets since March last year, has made “additional substantive progress” in terms of employment and inflation. The data on the epidemic are questioned every day. The agency confirmed on Wednesday that bond purchases remained at a known level and pace.

Economic data have hardly changed since the last meeting of the Federal Reserve in December if they show a slight deterioration, such as unemployment. As a result, analysts believe that US central bank policy makers may ignore any suggestion that the economy is expected to improve as vaccination progresses, Or, a possible rebound in inflation this spring will force them to reconsider their commitment to loose monetary policy. Another relevant indicator, GDP, will be released on Thursday.

Biden’s $1.9 trillion plan to combat the epidemic and its economic consequences could boost faster economic growth in the short term, but most experts still want the central bank to exercise restraint, With inflation still below the Fed’s annual target of 2%, the employment rate is still below its family planning level by about 10 million people. According to the Federal Reserve, the short-term risk scenario, along with the “mild” price rise in the spring, gives hope that the second quarter of this year will see enough people vaccinated to meet Biden’s promised summer population.

According to a survey of experts conducted by Bloomberg from January 15 to 20, the Federal Reserve used all its guns nearly a year ago, and now it does not seem to be ready to withdraw its anti brain virus batteries. Among the economists surveyed, 25% expect quantitative easing to begin in the last quarter of this year, from 35% in the first quarter of 2022 to 25% in the second quarter of 2022.