June 12, 2024

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The Federal Reserve keeps interest rates between 0% and 0.25%; Taper says near Investing.com

© Reuters.

Written by Leandro Manzoni and Ana Giulia Mezzadri

Investing.com – Federal Open Market Committee (FOMC)Fomc, its English acronym) was unchanged on Wednesday, which remained in the 0%-0.25% range. The decision, which was made unanimously, came in line with the expectations of 83.3% of the market, according to (the Federal Reserve).

The head of the foundation will give it a call at 3:30 p.m. to give more details of the decision. Follow it directly Investing.com.

The committee noted that if economic conditions continue to improve, it should initiate a moderate and partial withdrawal of the $120 billion per month monetary stimulus. “The committee assesses that the moderation in the pace of asset purchases should be justified in the very near future,” the statement said after the decision. The catalysts were adopted at the beginning of the pandemic, in March 2020, to provide liquidity to the markets, with $80 billion for the purchase of government bonds and $40 billion for mortgage bonds held by the private sector.

In December last year, the committee said it would continue the stimulus program until the US economy reached its maximum employment level and price stability, both of which are the Fed’s key monetary policy goals. those goals,” according to the statement.

The monetary authority estimates that inflation is high, but transient. In terms of economic activity, Fed officials are seeing improvements in the sectors hardest hit by the pandemic in recent months, but an increase in Covid-19 cases has slowed the recovery. The Fed also estimates that economic recovery still depends on the progress of vaccination to “reduce the effects of the public health crisis” on the economy, “but that risks to the economic outlook remain.”

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In addition to the monetary policy decision, the US monetary authority has released its members’ economic forecasts for the coming years, which is known as a “plot point”. These forecasts indicate whether the Fed will only maintain its rate hike schedule from 2023 onwards.

A kind of statistical graph

The forecast of most voting Fed members is that the interest rate will be at 0.3% in 2022, indicating that the possibility of an interest rate increase has been brought forward from 2023 to 2022, although Fed officials remain divided. About the exact time of rise. in interest. In the last projection, taken in June, the median forecast was 0.1% for the year. For 2023, the estimate has been raised to 1%, down from 0.6% previously.

All voting members of the central bank said that there will be no interest rate increase for 2021, while opinions for 2022 are divided: half of the economists do not expect an increase, and among those who expect an increase, most expect it to reach 0.5 For 2023, most people expect an increase of 1.25%, but there are those who expect 1.75%; While in 2024 the most robust forecast will reach 2.75% and the majority of managers are betting at 2.25%.

Regarding the central bank’s preferred inflation indicator, the forecast for 2021 was raised to 4.2%, compared to 3.4% previously estimated. The forecast for 2022 also rose to 2.2% from 2.1% previously. In 2023 and 2024, the numbers were kept at 2.2% and 2.1%, respectively.

The rate, which does not include volatile food and energy prices, is expected to stand at 3.7% in 2021, according to Federal Reserve voting members, who previously forecast 3% for this year. Forecasts for 2022 and 2023 were also raised to 2.3% and 2.2%, respectively, versus 2.1% for both years.

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Forecasts of economic growth, measured in turn, were lowered from 7% to 5.9% in 2021. For the following years, on the other hand, estimates were high. The index is expected to remain at 3.8% in 2022, compared to 3.3% previously, and 2.5% in 2023, compared to 2.4%.

Finally, the forecast is at 4.8% for this year, compared to a previous forecast of 4.5%. For 2022 and 2023, the estimates were maintained at 3.8% and 3.5%, respectively.