Time.news – Economic growth, despite the risks coming from Covid, is now a fact, as shown by the dynamics linked to employment, but the rise in inflation raises more than an alarm and then the Fed changes course (confirming the forecasts of the eve).
The US central bank has in fact decided to accelerate on the path of reducing asset purchases, doubling them from the previous 15 billion dollars a month to 30 billion starting next January.
Rates unchanged
All this while leaving interest rates unchanged between 0 and 0.25 percent. A level, Governor Jerome Powell assured, that “it will not be touched until we finish the tapering”, although there could be an upward revision (“we are well positioned to do so, if necessary”) even “before reaching the maximum occupancy “.
Work and employment
Moreover, the successes linked to the dynamics of work (“progress has been made towards full employment”), certified by the October data, led the Fed to decide to “accelerate on tapering”, which could “end in March” , as in the end the current economic growth is such “that it no longer needs aid”, explained the governor again during the press conference at the end of the Fed meeting.
Revision of GDP estimates
A meeting that also led to a revision of the estimates on the increase in GDP and the inflationary spiral in the US for the current year and in the short and medium term.
Well, the Fed has revised the growth estimates down slightly, bringing them to 5.5% in 2021, while forecasts are up for next year (at 4%) and reduced to 2.2% for the following year. On the other hand, forecasts regarding inflation are clearly up: 5.3% at the end of 2021, 2.6% in 2022 and 2.3% in 2023.
As regards interest rates, on the other hand, from the dot plots (the intentions of the FOMC members) it emerges that the US Central Bank is assuming 3 increases in the next year and as many in the following year.
Tapering
Returning to tapering, starting next January, the monthly pace of purchases of Treasury securities will be further reduced, bringing them to at least 40 billion dollars a month, while purchases of securities backed by agency mortgages will amount to at least 20 billions of dollars a month (thus a further doubling of what was decided at this meeting).
However, the Fed warns, “we are ready to adjust the pace of purchases based on changes in economic growth prospects” and on the basis of inflation, whose jump was not caused “by wage growth”, he said. Powell explained.
The shadow of the coronavirus remains on everything and the new Omicron variant, on “which the path of the economy continues to depend” even if “people, wave after wave, are now learning to live with it”.
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