The Federal Reserve has told the public that it has shifted the timeframe for the increase interest rates.
“Progress in vaccination it is likely to continue to reduce the impact of the public health crisis on the economy, but risks to the economic outlook remain, “the Federal Open Market Committee (FOMC) said in a statement.
Meeting before the “meeting” – Fed expects two rate increases in in 2023
A number of market players waited for the Federal Reserve to reveal some signals for market developments, one of which was that 13 of the 18 members of the FOMC expected by the end of year 2023 rate increase. The forecast of individual members shows the possibility of even two increases interest rates v in 2023.
After the FOMC meeting, the chairman Fedu Jerome Powell said the projections for the rate hike should be taken with “great foresight” and that the launch is “far in the future”. Go shopping bonds worth $ 120 billion which Fed conducted each month, Powell said a notice would be issued deciding to change the spending.
“You can imagine this meeting we had as ‘talking about talking about the meeting,'” the chairman said Fedu. “At forthcoming meetings, the committee will continue to assess progress economy towards our goals. As we said, we’ll notify you in advance before announcing any decision to make changes to our purchases. “
“The problem now is that demand is very strong, revenues are high, people have money in bank accounts. The demand for goods is extreme high and it didn’t go down, “Powell explained. “But as for too much correction, on the other side there is a possibility that inflation could in fact be relatively low in the future. But we are not focusing on that right now. “
At a press conference after the meeting, Powell discussed inflation. “We expect this high inflation it will now fall, “Powell told the press.” By no means do we rule out the chance that this may take longer than expected, and there is a risk that inflation will begin to affect inflation over time, “Powell said.
With the dynamics of an reopened economy and imbalances in supply and demand, Powell acknowledged that inflation may be higher than Fed he expected.
“As reopening continues, changes in demand may be sharp and rapid, and obstacles such as recruitment difficulties and other pressures may continue to limit how quickly supply is able to adapt, increasing the chances of inflation could have shown higher and more lasting than we expected, “the chairman noted Fedu during a press conference.
Fed also believe in the end year 2021 will be unemployment rate about 4.5%.
“We are on way to a very strong labor market, “Powell also told a news conference.
Response to notifications Fedu they are contradictory
“As far as inflation, it is precisely the factors that have limited it over the last 25 years and which Powell expects to continue to limit in the future, which are temporary, “wrote an economist and supporter after the FOMC meeting gold Peter Schiff. “After years of ruthless monetary policy Fedu inflation chickens are finally returning home to the chicken coop, “Schiff added.
„Fed he ignored all urges to slow down purchases, “he said after the committee meeting Fedu founder of northmantrader.com Sven Henrich. “Powell tore the carpet from under any opponents on the committee, insisting on further printing than during deep the global financial crisis with the most overheated economy in 50 years, inflationary pressures and the largest asset bubble in history. “
FOMC press conference: Not a single question by the media about record and expanding wealth inequality, asset bubbles, speculative behavior, or the homeless camp.
— Sven Henrich (@NorthmanTrader) June 16, 2021
“The market did not expect that,” explained James McCann, deputy chief economist at Aberdeen Standard Investments, in an interview with CNBC.Fed now signals that rates will have to rise sooner or later, with their forecast indicating two increases in in 2023. This change of attitude beats a bit with the latest claims Feduthat recent increase inflation is temporary. “
Other markets at a loss
Losses that are evident in indexu Dow Jones, as in other market indicators, can also be attributed to growing concerns about inflation. According to Powell, inflation expectations are for year 2021 now located at 3.4%, which is significantly higher than in the previous 2.2% projections from March.
Price Bitcoinu gradually failed to maintain the level of $ 40,000 and since the announcement Fedu gradually dropped to $ 37,000. Indices Dow a S&P 500 also fell 0.77% and 0.54%, respectively, after the Federal Reserve shifted its plan to 2 increases interest rates v in 2023.
Daily market performance with kryptoměnami. Source: Coin360
While Powell sought to describe the current inflation fluctuation as “temporary,” consumer prices They are at a 13-year high and analysts fear growing inflation affect postcovide recovery economy.
And even though Powell didn’t directly address whether or when Fed will start to reduce their purchases bonds for $ 120 billion a month, the decision to start raising rates in in 2023 suggests that the planned program will soon be cut before year 2023to be done with a modest and gradual impact on the markets.
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