Fed expects to delay taping until November or later, economists say
NS federal Reserve This week kicked off a much-anticipated meeting during which policymakers are widely expected to shed light on their plans so they can start dialing back support. US economy – Decisions complicated by rising inflation and sluggish job growth.
For months, Fed chairman Jerome Powell has promised that the US central bank will not begin opening up to ultra-easing monetary policies implemented during the coronavirus pandemic until the economy sees “significant further progress” toward full employment and stabilizing consumer prices.
During the Fed’s annual Jackson Hole symposium last month — held almost this year because of COVID-19 — Powell suggested that while the bar had met on inflation and the labor market had made “clear progress,” the Fed could soon cut its $120 billion. will start reducing. Monthly purchases of Treasury and mortgage-backed securities.
Powell said, “At the most recent July meeting of the FOMC, as most participants, I was of the view that if the economy grew broadly as projected, it might be appropriate to begin easing the pace of asset purchases this year. ” “The intermediate month has brought further progress in the form of a strong employment report for July, but also in the form of a further spread of the delta version. We will carefully assess incoming data and evolving risk.”
But those risks surfaced two weeks ago, when the Labor Department reported that employers added just 235,000 jobs in August, sharply slashing profit expectations of 728,000. It declined abruptly after solid gains of 1.1 million in July and 962,000 in June.
Economists were quick to blame job growth on the delta version of the coronavirus, noting that net job growth in leisure and hospitality – which includes bars, restaurants and hotels – was zero, a sign that Americans are vulnerable to the virus. Were pulling back on spending as it spread across the country.
Chris Zacarelli, chief investment officer of the Independent Advisors Alliance, said: “The surprisingly low job numbers this morning significantly dampened the tapering outlook as only 235,000 jobs were added in August, potentially giving the Fed a pause and its bond taper. Going ahead with its plans to announce the plans.” , said at the time.
The US central bank is grappling with how to change policies it implemented in March 2020 to keep the economy afloat without triggering a market sell-off.
Even though inflation is running well above the Fed’s preferred target of 2%, most experts agree that the Fed will not make any announcements on reducing its asset purchases until at least November.
“The recent stock market turmoil, fiscal cliff and a surprisingly weak August jobs report would give Federal Reserve Chairman Jerome Powell convenient excuses to reiterate his intention, but he should actually be short for the start of November.” will allow to reduce to . Danielle Dimartino Booth, CEO and Chief Strategist at Quill Intelligence.
The Fed will issue a statement after its two-day meeting ends on Wednesday, followed by a 2:30 p.m. press conference from Powell.
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The announcement will include a new set of economic projections, which policymakers expect to raise interest rates from current rock-bottom levels.
Projections from the central bank’s June meeting show that officials expect to raise rates by the end of 2023 twice, to about 0.6%, sooner than they had projected in March. At the time, the average official did not expect rates to change until 2024. Now, 13 of 18 Fed officials said they expect to start raising rates sometime in 2023, while seven policymakers will raise rates as soon as possible. As of 2022.
Economists expect a slight change in the outlook.
“Global financial risk is increasing, as are debt limits and uncertainty in the direction of domestic fiscal policy,” said Joseph Brusselas, chief economist at RSM. “These conditions are not conducive to an imminent change in policy.”
In addition to the September meeting, there are two more scheduled Fed policy-making meetings this year: November 3 and December 15.