Federal Reserve Chairman Jerome Powell arrived to speak at the “Fed Listons” event last year.
Eric Bardat / Agency France-Press / Getty Images
Federal Reserve Chairman Jerome Powell and his colleagues at the central bank faced skepticism and opposition in an attempt to guide markets about the future path of interest, it emerged in the minutes of their September meeting issued on Wednesday.
After their meeting, he issued a statement to the Federal Open Market Committee pledging to keep inflation close to zero until the central bank’s 2% target returns to normal for a while. Fed officials also released estimates that they show the rate will be close to zero at least until the end of 2023.
Two gifts came from the new forward guidance of the ten voting members of the committee. It was not until the minutes were published on Wednesday that it became known that there was widespread unease about the new policy among those who did not vote in the remaining seven officials.
According to the minutes, some of these Fed officials were paying close attention to the strategy, as guidance could limit central bank relief. They also argued that by influencing market perceptions about the future path of short-term interest rates, “such guidance could contribute to increasing fiscal imbalances, making it more difficult for the FOMC to achieve its objectives in the future.”
A “couple” of Fed officials argued against the strategy for a variety of reasons. They want the Fed to remain even stronger and less qualified to keep its commitment close to zero. They want to tell the Fed that the policy rate will remain close to zero until inflation briefly rises above 2%.
To confuse investors, Fed officials insisted the new strategy was not an “unconditional commitment” to a specific path of interest rates.
The Fed said data pointing to a strong economic recovery following the coronavirus epidemic would lead to short-term expectations near zero and vice versa, the Fed said.
Many market observers are talking about the Fed’s “promise” to keep the rate at zero by 2024.
Shares rose sharply on Wednesday, with the Dow Jones Industrial Average DJIA.
More than 500 points in afternoon trading.
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