WASHINGTON: Federal Reserve on Wednesday said it would begin to cut monthly bond purchases in November with a plan to end it in 2022, but argued that his belief that high inflation would prove the increase in interest rates.
However, the US central bank nodded on the difficulty of global supply as an increase in inflation risk, by saying that these factors “are expected to be temporary,” but need to provide an anticipated decrease in inflation.
“Given further progress, the economy has made it,” The Fed said he would begin to cut bond purchases, as expected widely, marking a formal shift from the policy implemented in March 2020 to combat sharp decreases and massive phks caused by covid pandemics 19.
But even in announcing the monthly deduction of $ 15 billion in the purchase of $ 120 billion in the monthly purchase of the Treasury and Securities supported by a mortgage (MBS), it does not signal a lot when you can start the next phase “normalization” by raising interest rates.
“Economic and work activities continue to strengthen,” said the Federal Open Market Committee who set a policy in his statement at the end of a two-day meeting, but did not change his intention to leave the flow of flowers overnight approaching inflation until inflation.
has reached 2% and “on the track to quite exceed 2% for some time.” Overall, the central bank said he still believed that high inflation would recently subside, but small changes in language showed Fed officials saw the process longer.
Inflation with the size of the Fed preference, personal expenditure of the price index, has run twice the target since May, but officials are reluctant to change their policy prospects until it is clear that the price increase speed will not facilitate itself.
The Fed instructed its market agents in the New York Fed to start executing the purchase of reduced bonds in the middle of this month, but only put the plan for November and December.
Starting in mid-November, it will buy $ 70 billion from Treasury and $ 35 billion per month, as soon as possible, which will drop to $ 60 billion from Treasury and $ 30 billion MBS per month in mid-December.
Policy makers, the Fed said, assessed that “a similar reduction in the purchase speed of clean assets is likely to be exactly every month, but (being) to adjust the pace of purchase if it is guaranteed by changing economic prospects.” Stock A.S.
Getting land after the release of the statement, with the S & P 500 index removing a simple loss up 0.10%.
Results on 10-year benchmarks A.S.
Note Treasury rose to a high session near 1.60% and the dollar weakened against a basket of major trading partners.
“They protected their bets, but it was not a new thing, because we had heard openly, they were a little less sure that everything would come down as soon as on the inflation side when they thought,” said Joseph Lavorgna, American head of economist at Natixis in New York .
“Along with supply disruption, things only drag a little longer and the statement reflects the reality,” he said.
Jerome Powell’s Fed seat will hold a press conference at 2:30 a.m.
EDT (1830 GMT) to describe the latest statement.