Steady rates. Purchases of securities confirmed at 120 billion per month, of which 80 for T-Bonds. Financial conditions still considered accommodative, despite the sharp rise in yields. The statement issued at the end of the March meeting of the Federal Reserve’s monetary policy committee does not reveal – as was widely expected – a change of course.
The diagnosis of the economy inevitably changes, but after signaling the slowdown in activity, the Fed already sees signs of recovery, even if the sectors that have been most severely hit by the epidemic remain “weak”.
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The novelty comes rather from the economic projections, which indicate a strong upward revision of the GDP for 2021: 6.5% compared to 4.2% in December, while the forecasts for the following years are confirmed (+ 3.3% from + 3.2% in 2022, + 2.2% from + 2.4% for 2023). Consequently, the unemployment rate for this year was also revised downwards (4.5% from 5%) and inflation upwards (2.4% from 1.8%), which however should return towards the ‘target of 2% in subsequent years. The return to activity – President Jerome Powell explained at a press conference – will lead to new pressures on prices, especially if problems arise on the supply side, but “these one-off price increases will likely only have transitory effects on inflation”.
Even the “dots”, which signal the intentions of individual central bankers on the future trend of rates, do not suggest a change of orientation. The median values have not changed and continue to point to steady rates for the whole of 2021, 2022 and 2023, even if for the last year the average – which is most affected by extreme values - records a minimal increase. The equilibrium value of interest rates – the long-term forecast – also remained stable at 2.5 per cent.
“The stance of monetary policy – added Powell – remains very accommodating while the recovery gains momentum”. It is not time, therefore, to talk about a tapering, a gradual reduction in the purchases of securities: “Not yet,” the president replied to an explicit question. A similar policy change would also be announced in advance by the Fed, the president explained.