[ad_1]
Rates stay longer until the economy reaches 2% inflation and tends to exceed that level. Securities purchases will continue at the current level of $ 120 billion per month
by Riccardo Sorrentino
Rates stay longer until the economy reaches 2% inflation and tends to exceed that level. Stock purchases will continue at the current level of $ 120 billion per month
3 ‘reading
Rates stopped at current levels until at least 2023 and purchases of securities at current rates, longer. The Federal Reserve is prolonging its expansionary orientation, following the adoption of the new strategy that requires it to reach an inflation target of 2% on average “over time.” In current circumstances, this means – explains the statement issued after the Monetary Policy Committee (FOMC) meeting – that the US central bank is now targeting inflation “moderately” above 2% “for some time.”
More precisely, the Fed aims to achieve, in addition to employment “consistent” with its own, articulated, assessment of the maximum achievable level, an inflation of 2% that points to slightly higher levels. Until this “intermediate” target is reached – functional to averaging 2% after the long phase of low inflation – rates will remain at the current level of 0-0.25%, while security purchases will continue. in current rates of 80 billion dollars per month (plus 40 for mortgage securities) in order to maintain the proper functioning of financial markets and ensure expansive financial conditions.
For the Fed, Chairman Jerome Powell explained at a press conference, this is a “powerful” guide to the future. Not to mention that the central bank of the United States remains ready to review its policy, obviously in an expansive sense, in case obstacles to the achievement of its objectives arise.
To clarify what these changes mean specifically, the “dots” help, the dots that indicate the forecasts – unofficial actually – of individual governors on the evolution of rates. As early as June, they indicated rates at current levels for 2021 and also for 2022, with a little more uncertainty. The first indications for 2023, now appearing for the first time in the quarterly economic projections, reveal that only four governors forecast higher rates (the average, however, driven by a single rate forecast of 1.25-1.50%, barely exceeds the 0.25% which today is the upper limit of the corridor).
In fact, the September decision was not made unanimously. Robert S. Kaplan, while sharing the need to keep rates stable for long periods, would have preferred greater flexibility from the moment the US overcomes the difficulties generated by the epidemic, that is, at least in terms of inflation, in 2023, while Neel Kashkari would have. I preferred that we talk about inflation core 2% to achieve it in a sustained way.
