Foreign Exchange Sky Eye APP News: The Federal Reserve reiterated its commitment to continue providing extraordinary spending to the economy on Wednesday (June 10), while policymakers expect GDP to shrink by 6.5% this year and the unemployment rate to reach 9.3% by the end of the year. "The current public health crisis will weigh on economic activity, employment, and inflation in the short term and pose considerable risks to the medium-term economic outlook," the Fed said in its latest policy statement. Policymakers for the first time since December Published economic forecast, saying that overnight interest rates will be kept near zero until the end of 2022.
While much of the statement repeated language from the April meeting, the Fed did commit to maintaining the current pace of asset purchases, which is about $80 billion in Treasuries and $40 billion in agency debt and mortgage-backed securities each month, a sign that It shows that the Federal Reserve has begun to deploy its long-term strategy for economic recovery.
expects the economy to officially begin to recover in 2021, with the economy expected to grow by 5% next year, and and to grow by 3.5% in 2022.
The Federal Reserve reiterated its commitment made at the beginning of the response to the new crown epidemic to continue to maintain loose monetary policy until the U.S. economy gets back on track. The Fed's response included cutting its benchmark overnight interest rate to near zero in March and extending trillions of dollars in credit to banks, financial institutions and businesses of all types.
But the forecasts released today are the first since December to provide policymakers with a view on how quickly jobs and economic growth might recover, and provide guidance on how long the federal funds rate will remain low in the future. Initial guidance.
For much of last year, Fed officials felt they were in an enviable position, with U.S. unemployment at record lows, inflation tame and strong expectations that both conditions would persist.
However, the unexpected arrival of the new coronavirus pandemic has plunged them into a protracted battle that may last for several years. After about 20 million Americans lost their jobs from March to May this year, they will do their best to make ends meet. Americans are back to work.
Wall Street stocks rose after the Fed's statement was released, with the benchmark S&P 500 index rising 0.3%. U.S. bond yields rose, the U.S. dollar fell, and spot gold rose strongly.
The following are analysts’ comments on this interest rate resolution:
Marc Chandler, chief market strategist at Bannockburn Forex, pointed out that this interest rate resolution is basically consistent with the market’s expectation that the Federal Reserve will not take any action. People like me who originally thought the Fed would introduce yield curve control now don’t expect the Fed to do so anytime soon, perhaps using the tool in late summer. In addition, the Fed's expectations for economic growth are very close to a V-shaped recovery.
Priya Misra, head of global rates strategy at TD Securities in New York, said: "This is largely in line with our expectations. We think it is too early to give specific forward guidance. There is nothing special about forward guidance. . In terms of quantitative easing, the Fed has maintained the current pace of bond purchases. They have retained a lot of flexibility in both interest rates and the scale of their asset purchases. I don't see a big reaction from the market. , some people are looking for clues about yield curve control, but it was not mentioned in the statement. It is too early, it is a new tool, and there is too much uncertainty around it. We do think officials will. Use this tool before the end of the year. "Charlie Ripley, senior strategist at
Alliance Investment Management, believes that the stance conveyed by today's Fed meeting is that the U.S. economy is in the initial stage of recovery and it is too early to change policy under the current circumstances.
Jon Hill, interest rate strategist at Bank of Montreal , wrote that the Fed's actions are in line with expectations. They acknowledge that unemployment will be high and inflation will be low, and they will keep interest rates very low for at least the next two years. This should have Good for the stock market.
Deutsche Bank strategist Alan Ruskin said the Fed's plan to keep interest rates on hold until at least 2022 is "good for risk appetite" and will lead to a weaker dollar; he noted that flexibility in asset purchases and "lower" unemployment forecasts also have Good for risky assets.
Michael Skordeles, U.S. macro strategist at Truist/SunTrust Advisory Services, noted: “With respect to the (interest rate) forecast, they are essentially saying we will keep rates on hold until 2022. Look at the dot plot, there are only two committee members Some rate hikes are forecast for 2022, so even if action is taken by then, (zero rates) could last for more than three years. "
" That was a pretty common view we heard from last Friday, which is sort of the case. Something like, 'Oh, now we're through the worst, we added 2.5 million jobs in May, there's not going to be any more fiscal aid,' and there's some people saying that in the near future. , over the next six months to a year, 'Oh, they (the Fed) are going to withdraw stimulus, they don't have to keep interest rates at zero for that long.'"
