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The Federal Reserve of the United States announced its decision on interest rates, which is highly anticipated by the markets. The Fed, which has kept the interest rate unchanged for a long time, came as no surprise, leaving it between 0 and 0.25 percent. The decision on the interest rate was made unanimously.
The Federal Open Market Committee announced that asset purchases will continue until further progress is made on maximum employment and price stability targets.
The Fed will continue to buy $ 80 billion in monthly treasury paper and $ 40 billion in mortgage-backed securities.
PRESIDENT FED POWELL: THE UNCERTAINTY CONTINUES
Fed Chairman Jerome Powell said uncertainty continues in the US economy due to the pandemic. Stating that households and businesses need support, Powell noted that the next few months will be difficult.
INTEREST EXPECTATIONS HAVE NOT CHANGED
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The estimates of interest rates of the officials of the Federal Reserve of the United States for the next period have not changed. According to the ‘Economic Forecast’ report announced by the Fed, interest estimates for this year and the next 3 years remained at 0.1 percent, as in the previous report. The long-term interest rate forecast from Fed officials is 2.5 percent.
GDP FORECASTS ARE REVISED POSITIVELY
Fed officials positively revised their GDP forecast. According to the ‘Economic Forecast’ report announced by the Fed, the expectation of a contraction in 2020 was 2.4 percent. The Fed announced that growth of 4.2 percent is expected next year. In the previous report, a 3.7 percent contraction was forecast for this year and a 4 percent growth next year.
Fed officials raised their 2022 growth expectation from 3 percent to 3.2 percent, while lowering their 2023 expectation from 2.5 to 2.4 percent.
The US economy grew 33.1 percent in the third quarter of the year, according to leading data. Final third quarter growth results will be announced on December 22.
UNEMPLOYMENT EXPECTATIONS 6.7 PERCENT
Fed officials revised down their unemployment rate forecast for this year. According to the ‘Economic Projection’ report announced by the Fed, the forecast for the unemployment rate has been reduced from 7.6% to 6.7% for this year and from 5.5% to 5% for next year.
Fed officials estimate an unemployment rate of 4.2 percent for 2022 and 3.7 percent for 2023. Previous estimates were at 4.6 percent and 4 percent, respectively. The long-term unemployment forecast remained at 4.1 percent.
The unemployment rate in the US was announced at 6.7 percent in November. The unemployment rate reached its all-time high of 14.7 percent in April, when the effects of COVID-19 peaked.
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PRESIDENT FED POWELL: BELOW ECONOMIC ACTIVITY BEFORE THE PANDEM
Fed Chairman Jerome Powell held a press conference after the interest rate decision. Powell said that the recovery of the economy was below the pre-pandemic period, but that the rate of recovery in the labor market was moderate. Powell added that uncertainties continue regarding the economy.
Powell’s statements are as follows:
We strengthen our verbal orientation, monetary policy will continue to provide strong support to the economy.
The pace of recovery in the economy has moderated in recent months.
In general, economic activity is still below pre-pandemic levels.
The way forward remains quite uncertain: spending on durable goods is strong and spending on services is weak.
The rate of recovery in the labor market is moderate.
Inflation continues to hover below the 2 percent target.
In general, inflation remains below the long-term target.
The economic outlook is uncertain, it depends on how the epidemic develops.
The next few months will probably be quite difficult.
We will maintain our supportive monetary policy stance until we reach our targets.
We believe that the expansion of the balance sheet supports the economy.
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Interest and balance sheet instruments provide strong support to the economy and will continue to do so.
The current economic recession is the most severe recession we have ever seen in our lives.
We will continue to support the recovery of the economy with both fiscal and monetary policies.
We will not describe the phrase “significant progress toward goals” in terms of specific numbers.
The new direction in asset buying is a strong message.
Introducing a verbal guide on the asset buying path.
As the medical field progresses with respect to the epidemic, we will be able to see better as the economic recovery improves.
We believe that our current political stance remains adequate.
Financial conditions are very favorable, interest-sensitive industries are doing well.
We have the flexibility to provide more support if circumstances change.
We will continue to use the tools at our disposal to support the economy.
We are ready to provide this support as long as we believe that stronger support for the economy can be used.
The conditions for using fiscal policy are currently very strong.
Households and businesses need financial support.
We do not have an opinion on the size of the financial support that will be offered.
We do not know what impact the increase in the number of coronavirus cases will have on the economy.
It will have serious effects in the first trimester.
The vaccination will begin to take effect in the second trimester, until the end of the first trimester.
We expect the economy to strengthen in the second half of next year.
My expectation for the second half of 2021 is a good performance.
House prices are not a concern at this time. House prices are not a concern right now, from a financial stability perspective. House prices are increasing due to high demand.
