Wednesday, August 18, 2021
The end of the aid is approaching
Fed is advising more and more intensively about the exit
The US Federal Reserve supports the economy with help of 120 billion dollars a month. With the relaxation of the Corona situation, companies are gaining traction again. And so the question of reducing the number of interventions is increasing. The biggest obstacle so far has been the situation on the labor market.
In the US Federal Reserve, considerations about the extent and timing of an exit from economic aid are gaining momentum. A majority considers a start of the so-called tapering this year to be appropriate under certain conditions, as can be seen from the minutes of the council meeting at the end of July. At the meeting, central bankers sought consensus on whether to cut back their monthly purchases of $ 120 billion in government bonds and mortgage securities.
According to the minutes, several Fed members spoke out in favor of reducing asset purchases in the coming months in order to better position the central bank for a possible rate hike should the economy continue to recover next year. Others, however, said the Fed could wait until early next year as they want to see stronger signs that the labor market has recovered from the pandemic.
For the majority of the Fed is not yet satisfied with the situation on the labor market. Most of the participants were of the opinion that “substantial further progress” has not yet been achieved on the way to the full employment target, according to the minutes. In the opinion of most members of the Monetary Policy Committee, however, the goal of price stability has been achieved. The Fed is aiming for annual inflation in the US of around two percent. Most recently, the value was 5.4 percent, but most experts expect a decline again soon.
Stockbrokers are currently tapping all US data with a view to the overriding question of when the Fed will start tightening monetary policy. This also applies to the minutes of the meeting on July 27th and 28th. Fed Chairman Jerome Powell said with a view to the tapering debate that the central bankers had “delved deep into the matter” for the first time and discussed the schedule, pace and composition. Many experts expect the planning to be completed soon and tapering to start in autumn.
Recent interviews and speeches revealed that central bankers appear to be on the verge of reaching an agreement to tighten extremely loose monetary policy in about three months if the economic recovery continues, with some central bankers pushing to end the purchase program by the middle of next year .
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