As the U.S. Central Bank prepares to slow down the large-scale monetary support injected into the world’s largest economy during the pandemic, the Federal Reserve will reveal the extent of its initial discussions on reducing the $120 billion asset purchase plan.
Minutes of the Federal Open Market Committee meeting last month meeting Expires at 2pm on Wednesday expected It shows that Fed policymakers are starting to consider when and how to start reducing purchases of U.S. Treasuries and mortgage-backed securities, which are combined with the lowest interest rates throughout the coronavirus crisis.
Some Fed officials have been pushing to start the “downsizing” process earlier, and it is expected that the labor market will recover faster and inflation will be more worrying.
But other senior central bank governors in the United States urged caution to reduce bond purchases. They believe that the rise in inflation will be temporary, the economy is far from full employment, and the pandemic is still a risk. Therefore, the market may refuse to actively remove currency support.
At the last FOMC meeting, the Fed kept the main interest rate close to zero, but raised interest rates Economic outlook This year will show stronger growth than initially expected.
Fed officials also predict that they will raise interest rates twice in 2023 to tighten policy, which is earlier than expected three months ago. But Fed officials warned that these forecasts will depend on the flow of economic data, and policy guidance can only be provided through FOMC statements.
Some investors interpreted the new interest rate forecast as an indication that the Fed’s response to inflationary pressures may be more sensitive than previously expected, prompting a sharp rise in the price of US government bonds, and the benchmark 10-year Treasury bond yield fell to 1.3 percent. This is the lowest level in four months.
The current trading price of ultra-long-term 30-year bonds is about 1.9%, far below the 2.3% level in early June.