Federal Reserve Update

Jay Powell’s speech at the Jackson Hole Central Bank Governor’s Annual Meeting on Friday will be scrutinized by investors for clues as to when the Fed may begin to reverse its pandemic era Stimulus plan.

The Chairman of the Federal Reserve will speak at 10 a.m. Eastern Daylight Time. He will speak at Highly uncertain The moment of the world’s largest economy.

Policymakers and economists are scrambling to assess whether there is potential damage Amazing surge In the Covid-19 case-which suddenly disrupted the Kansas City Fed’s plan to host this year’s seminar in the Rocky Mountains-it would be severe enough to undermine the Fed’s plan to eventually begin to scale back its intervention in financial markets.

The focus will be on the central bank’s $120 billion monthly asset purchase plan, which is Coronavirus crisis last year. Bond purchases will continue at this rate until the Fed sees “substantial further progress” on its average 2% inflation and employment maximization goals.

Conflicting economic signals make it difficult for central bank officials to reach a consensus on when the “gradual reduction” process should begin and when bond purchases should be stopped altogether.

More and more central bank officials point to the surge in the U.S. stock market Consumer priceDriven higher by shortages and broader supply chain constraints, to prove that the Fed should end these bond purchases as soon as possible, otherwise it may lead to higher inflation and financial stability issues.

Many of these more “hawkish” members of the decision-making Federal Open Market Committee supported announcing their withdrawal at its September meeting and advocated ending the program by the second half of next year at the latest.

If inflation proves to be more durable than initially expected, this will provide the Fed with the flexibility needed to raise US interest rates in 2022.The latest forecast issued by the Fed in June indicated that at least two interest rate hikes were expected In 2023.

However, compared with before the pandemic, the number of unemployed has increased by nearly 6 million, and due to the spread of the infectious delta virus, concerns about Covid have risen again. Another faction of officials believes that a more patient approach may still be appropriate.

Most market participants believe that an announcement may be made in November, and it will gradually decrease from December or January.

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