NEW YORK. The Fed’s Steering Committee has announced that it will start tapering from next November, while leaving rates between 0 and 0.25% unchanged. The target of maximum employment and inflation at 2% remains and for this reason monetary policy will remain “accommodative”. At the same time, the Committee “will be ready to appropriately adjust the orientation if risks arise that could hinder the achievement of the objectives”. The path of the economy, the final communiqué reads, “depends on the course of the virus”: “Progress in vaccinations and the easing of supply constraints are expected to support the continuing increase in economic activity and employment , as well as a reduction in inflation ». But, in any case, the downside “risks” persist.
The Federal Reserve, the final statement reads, acknowledges that “with advances in vaccinations and strong political support, indicators of economic activity and employment have continued to strengthen. The sectors most affected by the pandemic have improved in recent months, but the rise in Covid 19 cases in the summer has slowed their recovery. Inflation is high, largely reflecting factors that are expected to be transitory ». And on this front, the Committee notes, “the imbalances in supply and demand linked to the pandemic and the reopening of the economy have contributed to considerable price increases in some sectors. Overall financial conditions remain accommodative, partly reflecting political measures to support the economy and the flow of credit to US households and businesses ”.
The Committee seeks to achieve maximum employment and inflation at a rate of 2% over the long term. ‘As inflation has remained consistently below this long-term target, the Committee will aim to achieve inflation moderately above 2% for some time, so that inflation averages 2% over time and long-term expectations remain well anchored at 2% ». As for rates that remain at current levels, the Committee “expects it to be appropriate to maintain” this range “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2% and will be on track to moderately exceed that percentage for some time ”.
In light of the substantial progress made by the economy towards the Committee’s targets since last December, the Committee has decided to begin reducing the monthly pace of its net asset purchases by $ 10 billion for Treasury securities and by $ 5 billion. dollars for agency mortgage-backed securities’. Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $ 70 billion per month and agency mortgage-backed securities by at least $ 35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $ 60 billion per month and agency mortgage-backed securities by at least $ 30 billion per month. The Committee believes that “similar reductions in the pace of net asset purchases will be the right ones to make each month, but is ready to adjust the pace of purchases if justified by changes in the economic outlook”