The Fed is bouncing Wall Street up – the capital market

The Federal Reserve maintained a zero interest rate and announced that the aggressive asset acquisition would not be halted. Wall Street investors, as well as senior Fed officials, estimate that interest rates will rise inevitably by 2022, when the economy recovers – tonight Powell signaled that there will be no rate hike until at least 2023. With trillions of aid packages and over 100 million Americans receiving at least One dose of vaccine, the central bank expects the economic recovery to progress much faster than expected about 3 months ago.

“Thanks to the financial support and the pace of vaccine advancement, we expect faster labor market progress, and also inflation – we anticipate that this will happen, but first we will have to see it happen,” Powell said at the news conference. The FOMC is updating forecasts and expects the unemployment rate to fall to about 4.5% by the end of the year, and inflation to reach 2.2%. Three months ago, the Fed predicted that the unemployment rate would fall to 5%, and that inflation would rise to 2% by 2023.

Last year, Powell stated that the Fed was changing its approach to US inflation – so instead of aiming for a 2% inflation target, the bank would aim for “symmetric inflation” which would average around 2%. The Fed made it clear tonight that it would not consider raising interest rates until inflation Will reach 2% and exceed this target for a period of time. And as global inflation expectations continue to climb, reaching 5.66% in the US and 2.31% for 10 years, the Fed reassures investors against rising interest. It is important to understand that inflation is good for Wall Street, but the interest rate hike that is expected to follow will not.

Powell reiterated that until they see “further significant progress” toward a minimum employment target and stable prices, he will not return from the acquisition plan – each month the Fed buys $ 80 billion worth of government bonds, and an additional $ 40 billion for backed securities. Mortgages.

The Federal Reserve forecasts that 2021 GDP will grow by 6.5%, thus raising the December forecast to only 4.2%. For 2022 the Fed expects GDP growth of 3.3% and in 2023 of 2.2%, while in the long run the Fed expects Stable growth of about 2.3%.