The Fed Is about to Reduce Bond, and Inflation Is Estimated to Reach 5% Next Year Again -Part 5

Aynsley Moore

Oct 26, 2021

In the statement after the meeting, the participants agreed to change the expression on inflation from “risen” to “elevated”. If employment and inflation levels continue moving toward expectations, slowing down the asset purchases will soon be authorized. The committee members believe that the newly added statement is appropriate. In the near future, the committee is very likely to measure whether the standard for cutting bond purchases has been met. Informing the public in advance may reduce the risk that the market reacts adversely to the slowdown in asset purchases.

At the recently concluded International Finance Association (IIF) annual meeting, the vice-chairman of the Fed stated that he believes the standard of “substantial further progress” has long been achieved in terms of inflation and “has almost achieved” in terms of employment. He is optimistic about the prospects of the U.S. economy.

In an interview with US media on the 12th, the chairman of the St. Louis Fed said that the Fed should not only start the reduction in November, but also accelerate and finish the process preferably in the first quarter of next year. In this way, once the future inflation requires an early interest rate hike, the Fed will have plenty of room.

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