Fed's FOMC Resolution: At Least 3 Months Before Inflation

On December 16, at 3 a.m. Beijing time, the Fed announced its December monetary commission. The public revenue target is unchanged at 0-0.25%.

The Fed also announced that it would double the amount of monthly cuts in its $ 30 billion purchase program ($ 20 billion in US bonds and $ 10 billion in loan repayments) to account for the improvements. inflation and the continued improvement in exchange rates. the market. ) from January of next year. The Fed plans to cut its procurement budget by the same month next year.

The Fed said in January that the group would raise at least $ 40 billion from the US Treasury and at least $ 20 billion in repayable loans. This means that loan rates will fall to $ 60 billion in January 2022.The entire contract will be closed by the project at the end of the first quarter.. However, the crowd alsoIf the economic outlook changes, the Fed will adjust its purchasing power..

Federal Reserve

President Powell has made it clear that he does not support inflation during the campaign period, which means that the Fed will not increase inflation until the end of the first quarter of 2022. That means at least three months before the Fed won't raise rates.

Note.The Fed's rate hikes are minimal.. To date, the size of US Treasury bonds has exceeded $ 290 trillion.

On December 15, the United States Senate and House of Representatives announced bills that would raise the debt ceiling from the current $ 28.9 trillion to $ 31.4 trillion.Even if you increase the interest rate to 1%, you will have to pay an additional $ 2.9 trillion in interest.

Fed interest rate

Determined by changes in terms, there are significant changes in the FOMC's final resolution in 2021. In the section on economic research, the Fed continued to address the impact of the spread across the board. 'industry, but also added explanation of "strong job growth and significant unemployment in recent months." The Fed also said uncertainty caused by the global spread and reopening of the economy was driving the rising inflation. But markedly, the Fed removed the phrase from its December statement that "inflation is mainly due to a temporary effect."

Federal Reserve

In its December resolution, the Fed also deleted the description of the medium-term fiscal target and replaced it with the statement that "the inflation target is above 2%. Please keep in mind. mind that goal limitation is a fully functional goal.

Compared with September, 18 of the FOMC members are expected to start raising interest rates in 2022 and 2023, as their interest rate expectations have changed significantly. Among them, 12 members are expected to increase their interest rates at least three times next year. The new plans also show church members believe fees will triple or double in 2023 and 2024, and that public funds will increase 2.1% by the end of 2024.

Federal Reserve

In light of the economic outlook, members of the Fed have revised their forecasts for US real GDP growth for 2021 to 5.3% -5.8%, a further decline of 5.5% -6.3% in September , with an expected unemployment rate of 4.0-4.4. %, which is 4.5% of the previous value. % -5.1% compared to the same reduction. The PCE's key rate target is expected to be 4.4% -4.5%, which will rise another 3.5% -4.2% in September. Members also raised their financial expectations for 2022 to between 2.4% and 3.2%, continuing to maintain the political target of 2%.

full report

The Fed is committed to meeting its goals of full employment and stable prices, using whatever it can to support the US economy during this difficult time.

With the help of vaccination and the promotion of strong policy, the direction of economy and labor continued to strengthen. The markets most affected by the spread have improved in recent months but continue to be affected by the spread. Employment growth has been stable in recent months and unemployment has fallen sharply. Rising inflation due to global spreads and dissatisfaction with demand linked to the reopening of the economy. The entire financial system remains stable, in part affecting policies that stimulate trade and boost lending to U.S. households and businesses.

The path to continued economic development depends on the direction of the disease. Advances in vaccination and ease of product restriction are expected to support further growth in industry and operations, which will lower costs. Risks to the visual industry remain, including risks from new diseases.

The Commission is striving to achieve full employment and inflation of 2% in the long term. To support this objective, the Council decided to maintain the public revenue objective at 0-0.25%. As inflation has been above 2% for some time, the Commission believes that it would be necessary to keep costs down in this regard until the stock market reaches the level required by the overall performance measure. Due to rising inflation and continuing developments in the real estate market, the Board decided to start slowing down its monthly holdings. The national debt was reduced by $ 20 billion and the MBS by $ 10 billion in US dollars. Starting in January, the administration will increase its US debt to at least $ 40 billion per month, and MBS will hold more than $ 20 billion. While it may be necessary to reduce the cost of similar assets on a monthly basis, the Board has decided that it intends to adjust the value of the purchase if necessary to meet trade. The Fed's continued purchasing and securities policies will continue to streamline trade and finance, boosting lending to households and businesses.

In evaluating the appropriate role of tax policy, the Board will continue to monitor the impact of the information it receives on the company's outlook. If there is a risk that could affect the achievement of the board's objectives, the board intends to change its financial policy as necessary. The Commission's assessment will include a wide range of documents, including public health interpretation, business practices, financial distress and financial outlook, and financial and international development.

financial estimates

Compared to SEP of September 2021 based on financial projections:

We are lowering our real growth forecast for this year (5.9% → 5.5%), slightly increasing our forecast for next year (3.8% → 4.0%) and lowering our forecast for the year 2023 (2.5% → 2.2%).

The estimated unemployment rate for this year was lower (4.8% → 4.3%) and the forecast for next year was lower (3.8% → 3.5%).

According to the inflation forecast for this year increased (PCE inflation 4.2% → 5.3%, core inflation 3.7% → 4.4%), the forecast for next year inflation has also increased.

Interest rates are expected to triple, triple and double in 2022, 2023 and 2024, respectively.

bitmap

Interest rates on dot plots are expected to increase significantly. In the figure, the difference between the interest rate forecast for 2023 and 2024 is larger than the interest rate forecast for 2022.

Highlights of the conference

Faced with the tightening market and rising inflation, the FOMC decided to move faster. The Fed's insurance policy is expected to grow in mid-March, a few months before the FOMC meeting in November.

Do not buy assets as soon as the market does not need to support the policy as inflation increases and the market tightens. It also allows the Fed to keep the peace in the face of the financial crisis.

The rise of new trends and the emergence of Omi Keron divergences in recent weeks are putting visibility at risk. It is not known how long the insufficiency will last. Especially when there is a higher wave (contagion).

Phone inflation is well above the long-term target of 2% and could continue into the next year. The FOMC expects inflation to approach its long-term target of 2% by the end of next year.

The Fed will use the tools to support strong economic and trading conditions, as well as to prevent new inflation from defaulting.