Financial circles network April 29 news, the Federal Reserve on Wednesday at 2 p.m. Eastern Time (2 a.m. Beijing time on Thursday) announced the April monetary policy statement. The statement shows that the FEDERAL OPEN MARKET Committee (FOMC) decided at the meeting to keep its benchmark interest rate unchanged in the target range of 0% to 0.25%, in line with widespread market expectations. At the meeting, all officials in attendance voted in favor of the Fed's monetary policy actions.
Despite acknowledging that the U.S. economy is accelerating, the Fed still refuses to ease its accommodative monetary policy. The Fed also decided to keep the size of its bond-buying program on the same, both to support an economy that began to grow strongly in 2021 and to support the market while the 30-year mortgage rate is still around 3 percent.
While noting that U.S. economic growth and inflation are rising, members of the Federal Open Market Committee unanimously decided not to make changes to their policies. The post-meeting statement noted that efforts to fight the COVID-19 pandemic have helped boost the U.S. economy, but more needs to be done. "Indicators of economic activity and employment have been strengthened with progress in vaccination and strong policy support," the statement said. ”
"The sectors that have been most negatively affected by the pandemic remain weak but have shown improvement." The statement added. "Inflation has risen, which largely reflects the impact of temporary factors."
The committee again noted that the path to economic growth depends largely on the progress of the outbreak. As the United States vaccinates nearly 3 million people every day, the number of new cases per day has fallen dramatically. "This ongoing public health crisis continues to weigh on the economy, and the economic outlook remains at risk," the statement said. And at the last meeting in March, the post-meeting statement included the word "employment" in the expression in this sentence, suggesting that officials noted that the job market had improved.
The Fed's decision comes as the U.S. Commerce Department is about to release preliminary data on first-quarter GDP on Thursday, and economists expect GDP growth to reach 6.5 percent in the quarter. Most economists, including the Fed's own, expect the U.S. economy to usher in its best year since at least 1984.
At the same time, inflation has been rising all the time, with the Consumer Price Index (CPI) rising 2.6% year-on-year in March, the biggest gain since August 2018.
During the ongoing first-quarter earnings season, many companies have cited rising cost pressures. Procter & Gamble and other consumer brands say they intend to raise prices as input costs increase, but others say they will be able to absorb those costs. The market now expects inflation in the United States to be around 2.5% over the next five years; a year ago, inflation was less than 0.8%.
Stocks have previously been hit hard in March by rising US Treasury yields, which suggest higher inflation expectations, but have remained stable since then.
"The market doesn't like uncertainty. There's uncertainty about corporate taxes, there's uncertainty about interest rates, there's uncertainty about supply chain disruptions and cost inflation. Said Rebecca Corbin, CEO of consultancy Corbin Advisors. Companies are so good at dealing with this that, they've developed mitigation strategies, and everyone is fighting it. ”
In the case of the Fed, the bank is not worried about inflation, at least for now. Officials have repeatedly said they believe any upcoming round of price pressures is likely to be temporary and will ease once supply chain issues are resolved.
Goldman Sachs' latest forecast is that inflation will remain near the Fed's target until at least 2024. The investment banking giant said it expects inflation in the United States to reach 2.05 percent by the end of 2021, as measured by the Fed's favorite core personal consumption expenditure price index (CCPI), and 2.2 percent in the next three years, respectively.
Here is the full text of the Fed's April monetary policy statement:
The Fed is committed to using its full range of tools to support the U.S. economy during this challenging time, thereby advancing its goal of maximum employment and price stability.
The coronavirus pandemic is causing enormous human and economic hardship in the United States and around the world. With progress in vaccination and strong policy support, indicators of economic activity and employment have strengthened. The sector sectors that have been most negatively affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting the impact of temporary factors. Overall financial conditions remain accommodative, reflecting in part policy measures to support the economy and allow credit to flow to U.S. households and businesses.
The path of economic development will depend to a large extent on the path of the virus, including progress in vaccination. The ongoing public health crisis continues to weigh on the economy, and the economic outlook remains at risk.
The FOMC seeks to achieve the targets of maximum employment and 2% inflation over the longer term. With inflation consistently below this long-term target, the FOMC aims to achieve inflation moderately above 2% over a period of time in order to bring the average inflation rate to 2% over time, while long-term inflation expectations remain well anchored at 2%. The FOMC expects to maintain an accommodative monetary policy stance until these results are achieved. The FOMC has decided to keep the federal benchmark rate unchanged at the target range of 0% to 0.25%, and expects that it will be appropriate to maintain this target range until job market conditions reach levels consistent with the Commission's assessment of maximum employment and inflation has risen to 2% and is expected to moderately exceed 2% for some time. In addition, the Fed will continue to increase its holdings of U.S. Treasuries at least $80 billion per month and its holdings of institutional mortgage-backed securities (MBS) at least $40 billion per month until significant further progress toward the FOMC's maximum employment and price stability targets is made. These asset purchases have helped foster smooth market operations and accommodative financial conditions, thereby supporting credit flows to households and businesses.
To assess the appropriate stance of monetary policy, the FOMC will continue to monitor the impact of upcoming information on the economic outlook. If risks arise that could hinder the achievement of its objectives, the FOMC will be prepared to adjust its monetary policy stance as appropriate. The FOMC's assessment will take into account a wide range of information, including public health, job market conditions, inflationary pressures and inflation expectations, as well as readings on financial and international developments.
The members who voted in favor of the FOMC's monetary policy action at the meeting were: Chairman Jerome Powell, Vice Chairmen John C. Williams, Thomas I. Barkin, Raphael W. Bostic, Michelle W. Bowman, Lyle Bowman, and Lyle Bowman. Lael Brainard, Richard H. Clarida, Mary C. Daly, Charles L. Evans, Randal K. Quarles, and Christopher J. Waller.