The Federal Reserve says it will borrow at least $ 120 billion a month until it makes “significant progress” in recovery, and moves to strengthen its support for the U.S. economy amid the Corona virus epidemic.
The guidance of the Federal Open Market Committee came at the end of a two-day meeting during which federal officials improved their economic forecasts, but predicted that interest rates would remain near zero until the end of 2023.
The language of borrowing reflects the central bank’s commitment to keep interest rates close to zero until the economy reaches full employment and inflation remains on track to exceed its 2 percent target for some time.
But it is less prone to calls for a more robust monetary stimulus to deal with the disappearing recovery by extending the average maturity of its bond purchases or increasing its total volume.
“The Federal Reserve will increase its treasury bonds to at least $ 80 billion a month and agency mortgage-backed bonds to at least $ 40 billion a month, until there is significant improvement in the group’s maximum employment and price stability goals,” the FOMC said.
“This property purchase helps to develop smooth market functioning and accommodating financial conditions, thereby supporting the flow of credit to homes and businesses,” it added.
The guideline sets a long-term limit for central bank bond purchases; An earlier report had said they would only continue in the “coming months”. The rest of the FOMC report remained virtually unchanged, with policymakers describing a recovery from the impact of the economy. International spread But still runs below capacity.
During a press conference following the FOMC meeting, central bank chairman Jay Powell said the new guidelines on asset purchases were “powerful news” about the central bank’s commitment to encouraging recovery.
“We have paved a path for what we have done so that we can keep monetary policy more accommodating for a longer period of time. Until we get very close to our goals, this is not really the way it was in the past,” he said.
Nevertheless, the federal leader stressed that fiscal policy would be the most effective way to control the tight link-up of the economy in the coming months. “It seems like a period of fiscal policy that really needs it, which is why we get it so positively,” he said. Moved closer b 900bn per induction set.
According to the estimates of the average central bank policymaker, the American economy It is expected to shrink by 2.4 per cent in 2020 and rise again by 4.2 per cent next year, slightly better than the central bank’s forecasts for September.
The latest economic data shows a recession as it continues to deteriorate Labor market Recovery and weakness Retail, The medium-term picture has improved as a result of vaccines being released faster than expected.
U.S. central bankers’ expectations for interest rate hikes have largely remained unchanged, with only one in 1722 expecting higher rates in 2022 and five in 2023.
Long-dated U.S. Treasuries initially sold out after the report, sending the yield for the 10-year note up 0.03 percentage points to 0.94 percent before the retreat. Two-year treasuries were very low, yielding 0.12 percent.
The S&P 500 fell 0.2 percent before rising again.
Peter Dixir, chief macro strategist at Academy Securities, said the short sale reflects some frustration among investors about the decision to stop fixing some bond-buying scheme. “There was little hope that they would be a little more aggressive,” he said.